Economic Benefits Study. South Okanagan Similkameen. National Park Reserve. British Columbia. South Okanagan Similkameen

Transcription

1 Economic Benefits Study South Okanagan Similkameen National Park Reserve British Columbia Prepared by Development Consulting Group (Vancouver) in collaboration with Land Strategies (Calgary) September 2005 Prepared for South Okanagan Similkameen National Park Steering Committee

2 Table of Contents EXECUTIVE SUMMARY i 1.0 INTRODUCTION PROJECT DESCRIPTION Park Location Park Size Nearby Communities STUDY METHODOLOGY Parks Canada Methodology Port Of Vancouver Methodology South Okanagan-Similkameen National Park Methodology INVESTMENT BENEFITS National Park Investment National Park Visitation Levels Accommodation Sector Investment Residential Sector Investment Other Sector Investment Total Investment Benefits EMPLOYMENT BENEFITS National Park Employment Accommodation Sector Employment Residential Sector Employment Other Sector Employment Total Employment Benefits INCOME BENEFITS National Park Income Accommodation Sector Income Residential Sector Income Other Sector Income Total Income Benefits EXPENDITURE BENEFITS National Park Visitor Spending Patterns National park Visitor Expenditures Employment Expenditures Total Expenditure Benefits TAXATION BENEFITS Federal Government Taxes Provincial Government Taxes Municipal/Regional Government Taxes Total Tax Benefits POTENTIAL NEGATIVE IMPACTS Helicopter Flight Training Business Guide Outfitting Business Ranching Operations FIRST NATIONS IMPACTS 35 ECONOMIC BENEFITS STUDY

3 r L a South Okanagan Similkameen National Park Reserve Executive Summary BRITISH COLUMBIA Prince George ALBERTA 1. Context In 2002 a group of local Okanagan conservationists came together to promote the preservation of Southern BC Interior desert grasslands ecosystem as a National Park. This advocacy group acquired a wide range of local and environmental support for the park concept and was eventually successful in having the South Okanagan / Similkameen considered by senior levels of government and the local First Nations as the candidate site for a National Park Reserve in Region 3. Eventually the park advocacy group coalesced into the South Okanagan Similkameen National Park Steering Committee (SOSNPSC). In the spring of 2005 this body retained Land Strategies Ltd, who in collaboration with Development Consulting Group, estimated the economic benefits to the local economy resulting from the proposed National Park Reserve in the South Okanagan / Similkameen of British Columbia. Vancouver Victoria Kamloops Kelowna Osoyoos Edmonton Calgary The report was not sponsored nor funded by Parks Canada. While some capital cost consultation was untaken with Parks Canada the information provided was of a purely conceptual nature and does not reflect what may eventually unfold if the park reserve proceeds. WASHINGTON MONTANA 2. Location OREGON IDAHO The general proposed park area evaluated for the economic benefits purposes incorporates approximately 35,000-40,000 hectares in the Mount Kobau, Chopaka and Snowy areas of the South Okanagan and Similkameen Valleys. (see map) Blue Mtn Possible Park Reserve Penticton 3. Communities NORTH KM S i Snowy Mtn Olalla m 3A Keremeos i l k a m e e n British Columbia Washington Cawston R i v 3 e Orofino Mtn Kaleden Mt Parker Mt Kobau S k a h a 97 L a k e 97 Okanagan Falls Vaseux Lake Mt Keogan O k a n a g a n Oliver R i v e Osoyoos Mt Kruger r O s o y o Mt Christie o s k e 3 Mt Underdown Anarchist Mtn There are four municipalities, four unincorporated towns and three First Nation communities located within a minute drive of the proposed national park reserve. These are: The City of Penticton Town of Osoyoos Town of Oliver Village of Keremeos Okanagan Falls Kaleden Cawston Olalla Lower Similkameen Indian Band Osoyoos Indian Band Upper Similkameen Indian Band Because of their geographic proximity, these communities are expected to receive most of the direct and indirect economic benefits generated by the proposed South Okanagan-Similkameen National Park Reserve. ECONOMIC BENEFITS STUDY - i

4 4. Park Visitors 350, ,000 Total Park Visitors The number of visitors to the proposed South Okanagan-Similkameen National Park Reserve could potentially range from 50,000 in 2009 to 300,000 in To put these figures into perspective, visitation levels at comparable national parks during the past five years ( ) averaged 654,000 at Pacific Rim on Vancouver Island, 402,000 at Waterton Lakes in southern Alberta and 323,000 at Point Pelee in southern Ontario. Total Park Visitors 250, , , ,000 50, Capital Costs is estimated at $10 million. This budget scenario includes $8 million for hard costs such as a visitor reception centre (location to be determined), administration buildings, trails and habitat preservation plus $2 million for soft costs such as site planning, wildlife habitat studies and project management. 6. Economic Benefits The following chart provides a summary of the estimated economic benefits of the proposed South Okanagan-Similkameen National Park Reserve over the next ten years ( ) using 2005 dollars: Investment Employment Income Expenditures Government tax revenues $ 72.0 million 832 full time equivalent jobs $ 56.3 million $ million $ 39.9 million The total investment benefits of the proposed national park reserve over the period are estimated at $72 million. Investment benefits include $28.75 million of new hotel construction, $3.55 million in new campgrounds, $22.64 million of new residential construction and $7.12 million of other development in the South Okanagan-Similkameen area. The multiplier effect of a large capital project is often defined as the ratio of total investment to direct investment. In this case, direct investment refers to the $10 million capital cost for the project itself. Based on this definition and the figures cited above, the proposed national park reserve will have a multiplier effect of approximately 7:1 on the local area economy. Employment benefits of the proposed national park reserve over the period are estimated at 832 full time equivalent jobs. Of this total employment effect, construction and ongoing operations account for 46% and 54% respectively. On the operating side, the national park reserve accounts for 44% of the jobs created during the period; the accommodation sector (hotels plus campgrounds) and all of the other related businesses provide 18% and 38% of the operating jobs respectively. Total income benefits are defined as the sum of construction plus operating income in the national park reserve, construction plus operating income in the hotels and campgrounds, construction income in the residential sector and construction plus operating income in the ECONOMIC BENEFITS STUDY - ii

5 non accommodation sectors of the local area economy. Based on this definition, total income benefits over the period are forecast at $56 million. Total expenditure benefits are defined as the sum of national park reserve visitor spending plus spending generated by employment income. Based on this definition, total expenditure benefits in the local area over the period are forecast at $120 million. National park reserve visitors account for about 76% of these total expenditure benefits. Over the period federal government revenues will include $10.0 million of GST, $7.8 million of income tax, $5.5 million of national park reserve user fees and $1.6 million of CPP contributions and EI premiums. Over the same ten year time frame the provincial government revenues will include $3.9 million of income tax, $2.8 million of PST and $1.6 million of hotel room tax. Over the period, the municipal government revenue share of hotel room tax is projected at $334,000. Over the same ten year time frame, municipal and school district property tax revenues (most of which will accrue to local area municipalities and school districts) will total $2.9 million. 7. First Nations The proposed South Okanagan-Similkameen National Park Reserve may have a number of positive impacts on local area First Nations. By virtue of their proximity to the proposed national park reserve, the Osoyoos, the Lower Similkameen and the Upper Similkameen Indian Bands all stand to benefit from this project through possible periphery investment opportunities, enhancement of existing businesses and job opportunities. Specifically the Osoyoos Indian Band owns a number of businesses that will benefit from the increasing number of tourists drawn to the area by the proposed Park Reserve (eg. the Nk Mip RV Park, the Nk Mip Cellars winery and the Nk Mip Desert Centre). Since the proposed national park reserve will not likely include any on site accommodation, the Ashnola campground near Keremeos (owned by the Lower Similkameen Indian Band) may be well situated to upgrade and attract overnight visitors. Lastly the Mascot Mine project in Hedley (an Upper Similkameen Indian Band venture) will benefit from increased tourist traffic along Highway 3. ECONOMIC BENEFITS STUDY - iii

6 1. Introduction Development Consulting Group has been retained by Land Strategies to prepare an economic impact study for the proposed South Okanagan-Similkameen National Park Reserve. The primary purpose of this study is to quantify the positive and negative impacts that the proposed national park reserve will have on the local economy in general and on the nearby communities of Penticton, Oliver, Osoyoos and Keremeos in particular. For presentation purposes, economic impacts have been analyzed under the following headings: investment benefits (Section 4); employment benefits (Section 5); income benefits (Section 6); expenditure benefits (Section 7); taxation benefits (Section 8); negative impacts (Section 9); First Nations impacts (Section 10). By way of introduction to this economic impact analysis, Section 2 that follows provides a brief description of the proposed South Okanagan-Similkameen National Park Reserve. Section 3 presents some background information on the methodology typically used to determine economic impacts as well as the somewhat different approach followed in this report. ECONOMIC BENEFITS STUDY - 1

7 NORTH KM i e r e r s L a k 2. Project Description South Okanagan Similkameen National Park Reserve The economic benefits of the proposed South Okanagan-Similkameen National Park Reserve will be determined to some extent by its location and size and by its proximity to existing communities. These locational factors are dealt with in turn below. 2.1 Park Location Vancouver Victoria BRITISH COLUMBIA Prince George WASHINGTON OREGON Blue Mtn Possible Park Reserve Kamloops Kelowna Osoyoos IDAHO Kaleden S k a h a L a k ALBERTA Penticton Edmonton Calgary MONTANA Mt Christie As its name implies, the proposed national park reserve will encompass portions of the South Okanagan and Lower Similkameen regions of British Columbia. These adjoining areas are located approximately 350 kilometers east of Vancouver via Highway 3 and approximately 80 kilometers south of Kelowna via Highway 97. The provincial road map following this page shows the location of the South Okanagan and Lower Similkameen areas in relation to Vancouver and Kelowna. The driving time to the proposed South Okanagan-Similkameen National Park Reserve is about four hours from Vancouver and about one hour from Kelowna. The area is also less than an hours drive from the Osoyoos border crossing into the United States. 2.2 Park Size Although the boundaries for this proposed national park reserve will not be identified for some time, Parks Canada has identified several areas of interest where preliminary research as well as consultation with First Nations, the general public and potentially affected stakeholders is currently underway. These areas of interest include: the South Okanagan Grasslands protected area, located on both sides of Highway 3 between Osoyoos and Keremeos; the Snowy protected area, located on the south side of Highway 3 immediately east of Cathedral Lakes Provincial Park; 3A Mt Parker 97 Okanagan Falls Vaseux Lake the Nk Mip desert, located on Osoyoos Indian Band reserve land along the east side of Osoyoos Lake; S i Olalla Orofino Mtn m Keremeos i l k a m e e n Cawston R Snowy Mtn British Columbia Washington v 3 Mt Kobau Mt Keogan Oliver 97 O k a n a g a n R i v e Osoyoos Mt Kruger O s o y o o e 3 Mt Underdown Anarchist Mtn According to information available on the BC Parks web site, the South Okanagan Grasslands protected area is comprised of four physically separate parcels of land: Mount Kobau, Kilpoola, Chopaka East and Chopaka West. These four parcels of land have a combined land area of approximately 9,000 hectares. The Snowy protected area covers approximately 25,000 hectares. The BC Parks map following this page shows the location of these two protected areas in relation to the nearby communities of Osoyoos, Oliver, Penticton and Keremeos. The Nk Mip desert lands constitute a portion of the Osoyoos Indian Band reserve. According to base mapping provided by Land Strategies, the Nk Mip desert lands cover approximately 1,000 hectares. Based on the parcels of land identified above, the proposed South Okanagan-Similkameen National Park Reserve will cover a total of between 35,000-40,000 hectares ( square kilometres). ECONOMIC BENEFITS STUDY - 2

8 To put this land area into perspective, the following chart ranks most of the existing national parks in British Columbia in order of decreasing size based on information obtained from the Parks Canada web site. Note that in the case of Pacific Rim, Gwaii Hanaas and Gulf Islands, the park area includes both land and water. Park Name Park Area Gwaii Hanaas 150,000 hectares Kootenay 140,000 hectares Glacier 135,000 hectares Yoho 131,000 hectares Pacific Rim 51,000 hectares Mount Revelstoke 26,000 hectares Gulf Islands 4,000 hectares Based on the estimated land area cited above, the proposed South Okanagan-Similkameen National Park Reserve would be the sixth largest in British Columbia. 2.3 Nearby Communities The proposed South Okanagan-Similkameen National Park Reserve is located within easy driving distance of Vancouver and Kelowna. According to BC Stats, the Greater Vancouver Regional District had a population of 2,132,000 in The adjoining Fraser Valley Regional District (including the cities of Abbotsford and Chilliwack) which is about one hour closer to the proposed national park reserve had a population of 260,000 in Kelowna is the largest city in the interior of the province. According to BC Stats, the City of Kelowna had 105,000 residents in The total population of the Regional District of the Okanagan Similkameen is approximately 83,000. There are four municipalities, four unincorporated towns and three First Nation communities located within a minute drive of the proposed national park reserve. In order of decreasing size, these are: Municipalties the City of Penticton with a 2004 population of 32,900; the Town of Osoyoos with a 2004 population of 4,600; the Town of Oliver with a 2004 population of 4,400; and the Village of Keremeos with a 2004 population of 1,300; Unincorporated towns Okanagan Falls with a population of 2,000; Kaleden with a population of 1,300; Cawston with a population of 1000; and Olalla with a population of 400; First Nation communities Lower Similkameen Indian Band, Osoyoos Indian Band and the Upper Similkameen Indian Band with populations of approximately 600, 400 and 60 respectively. Because of their geographic proximity, these eleven communities are expected to receive most of the direct and indirect economic benefits generated by the proposed South Okanagan-Similkameen National Park Reserve. ECONOMIC BENEFITS STUDY - 3

9 3. Study Methodology South Okanagan Similkameen National Park Reserve Many different methodologies have been used to determine economic impacts. To provide the reader with some background information in this area, Section 3.1 provides a brief summary of the methodology used in a recent economic impact study of national parks in Canada. Section 3.2 outlines the methodology used to determine the economic impacts associated with the Port of Vancouver. Section 3.3 explains the methodology used in this report to estimate the economic benefits that are expected to flow from the development of the proposed South Okanagan-Similkameen National Park Reserve. 3.1 Parks Canada Methodology In 2001, the Outspan Group prepared a study entitled A Study of the Economic Impacts of Parks Canada. The primary purpose of this study was to estimate the economic impacts associated with spending by Parks Canada. The study begins by making the following distinction between economic impacts and economic benefits: When a public agency such as Parks Canada spends money, there are impacts associated with that spending, creating beneficial economic activity in the local economy which would not have been created without the public agency spending. But all expenditures, no matter what they are for or who makes them, have this impact. Spending by a public agency, therefore, means that impacts in one area will be offset by a lack of impact in other areas. The net effect can be considered neutral; it really reflects a redistribution of impacts. On the other hand, federal spending within a local park area can clearly be seen as an injection of new funds into the local economy and with certain adjustments can be considered an economic benefit. Visitor spending on tourist services also creates economic impacts. These impacts occur whether the visitors are from the local area or some distance away. However, the spending by tourists also represents expenditures that were not made elsewhere, so that one area s gain is another s loss. Once again, the overall effect is a redistribution of impacts. On the other hand, once again, this spending can be considered a commercial benefit to an area if it would not have occurred without the park. In summary, the impacts associated with spending by public agencies and tourists visiting the park can be considered benefits when they originate from outside the area being assessed. With this distinction in mind, the study measures economic impacts in three different ways: 1. gross domestic product, the net value of production or value added; 2. labour income (mostly wages and salaries paid to individuals); 3. employment as measured by full time equivalents (the equivalent of one year of work for one person). Using a Statistics Canada input-output model for the Canadian economy, the study determined gross domestic product, labour income and employment impacts based on a detailed analysis of expenditures from two sources: spending by Parks Canada and spending by visitors. Some transfer expenditures by Parks Canada were not included as expenditure inputs. Examples of excluded expenditures are lease buyouts and payments in lieu of taxes. ECONOMIC BENEFITS STUDY - 4

10 Using data from various traveller surveys, spending by visitors was disaggregated into a number of categories including transportation, accommodation, food and beverages, retail and other items. Different classes of visitors were assumed to have different spending patterns. For example, expenditures by same day trip visitors (ie. local area residents) were adjusted by excluding the accommodation costs of overnight trip visitors and by reducing their food and beverage costs to 60% of that spent by overnight visitors. Since no data was available on the proportions of park visits which were part of overnight trips and same day trips, it was assumed that 65% of visits were part of overnight trips and 35% were same day trips. It was also assumed that 70% of national park visitors originated from Canada, 25% from the United States and 5% from overseas. With some adjustments to reflect local market conditions, these assumptions will be incorporated into the economic benefits analysis for the proposed South Okanagan-Similkameen national park presented in the following sections of this report. In a nutshell, the study determined that impacts associated with visitor spending far outweighed impacts associated with Parks Canada spending. For British Columbia in 2001, visitor spending accounted for 4,796 full time equivalent jobs as compared to only 970 full time equivalent jobs generated by Parks Canada spending--a ratio of about 5: Port Of Vancouver Methodology In 2001, Intervistas Consulting prepared an economic impact study for the Port of Vancouver. Like the Parks Canada report described above, the Intervistas Consulting report uses a set of multipliers from a Statistics Canada input output model to determine the economic impacts of the Port of Vancouver on the local, provincial and national economy. The Intervistas report deals primarily with impacts on employment and economic output (gross domestic product). Unlike the Parks Canada study, the Intervistas report also includes an analysis of tax contributions that are directly related to the Port of Vancouver. These include: income taxes and other deductions (mostly EI, CPP and WCB) paid by employers and employees to the federal and provincial governments; GST paid by cruise ship passengers to the federal government; PST and hotel tax paid by cruise ship passengers to the provincial government; property taxes paid by port related firms located on Port of Vancouver land to municipal governments; payments in lieu of taxes paid by the Port of Vancouver to municipal governments. Somewhat arbitrarily it would seem, the following tax contributions were not included in the analysis: taxes associated with indirect or induced employment (multiplier effects); GST and PST paid by port employees when they spend their income. The Intervistas report provides a breakdown of economic impacts into three categories. Using employment as an example, these three categories are: 1. direct impacts, for example the jobs of Vancouver Port Authority employees as well as jobs at the harbour side cargo terminals and at transportation suppliers including trucking companies, railways and shipping lines; 2. indirect impacts, defined as employment that is generated to support the direct jobs identified above (eg. employment at a company that provisions cruise ships); ECONOMIC BENEFITS STUDY - 5

11 3. induced impacts, defined as employment that is generated because of expenditures by individuals working directly or indirectly for the port (eg. sales staff in a retail outlet or restaurant that caters to direct and indirect workers as identified above). Total impacts are defined as the sum of direct, indirect and induced impacts. Using employment as an example, the approach taken in the Intervistas report is to measure direct impacts as accurately and comprehensively as possible (eg. a survey of individual companies to determine the number of jobs and payroll). This data is then combined with multipliers generated by the input output model referenced above to estimate indirect and induced impacts. Based on this methodology, the Intervistas report determines that the maritime cargo operations of the Port of Vancouver generates 19,720 direct jobs, 14,373 indirect jobs and 11,592 induced jobs. For the cruise ship side of the business, the report identifies 4,510 direct jobs, 2,396 indirect jobs and 2,301 induced jobs. Based on these figures, employment multipliers are as follows: for maritime cargo operations, an indirect multiplier of 1.73 (ie. one direct job creates an additional 0.73 indirect jobs) and a total multiplier of 2.31 (ie. one direct job creates an additional 1.31 indirect and induced jobs); for cruise ship operations, an indirect multiplier of 1.53 and a total multiplier of Because it is a tourist oriented industry, the cruise ship employment multipliers identified above provide a reference point for the proposed South Okanagan-Similkameen National Park Reserve. 3.3 South Okanagan-Similkameen National Park Reserve Methodology The primary purpose of this study is to estimate the economic benefits of the proposed South Okanagan-Similkameen National Park Reserve on the local economy. Following the rationale summarized above for the Parks Canada study, most of the economic impacts associated with the proposed national park reserve can be considered economic benefits to the local communities of Penticton, Osoyoos, Oliver and Keremeos. These local communities and the rural areas in between constitute a very small portion of the province of British Columbia and an even smaller portion of its economy. Using population as a measure, the four local area communities cited above together constitute about 1% of the total provincial population. Given the over representation of seniors in places like Penticton and Osoyoos, their combined share of the provincial economy, measured in terms of jobs or gross domestic product, is probably less than 1%. For a region and an economy this small, input output models with their macro level multipliers tend to be rather unreliable. At the regional level, indirect and induced multipliers become relatively small due to the high level of leakage of jobs and spending to larger communities located outside the impact area. With this expectation in mind, the methodology used in this study to determine the economic benefits of the proposed South Okanagan-Similkameen National Park Reserve on the economy of the local area measures direct impacts as accurately as possible and then follows the money to identify indirect and induced impacts. For the purposes of this analysis, local area refers to that portion of the South Okanagan Similkameen region that extends from Penticton south to the US border and from Osoyoos west to Keremeos. ECONOMIC BENEFITS STUDY - 6

12 Rather than using input output model multipliers in an attempt to measure all indirect and induced impacts at a provincial level, the methodology set out in the following sections of this report quantifies only those indirect and induced impacts that are specifically identified as benefits to the local area economy with the one notable exception of taxation (most of which accrues to the federal and provincial governments). As a result, the level of benefits identified in this report can be considered a conservative estimate of the total impacts associated with the proposed South Okanagan-Similkameen National Park Reserve. ECONOMIC BENEFITS STUDY - 7

13 4. Investment Benefits South Okanagan Similkameen National Park Reserve This section of the report identifies the investment benefits of the proposed South Okanagan-Similkameen National Park Reserve on the local area economy over the next ten years ( ). This forecast period has been determined based in part on discussions with Parks Canada staff with regards to the probable development timetable for the proposed national park reserve. More specifically, the following development timetable has been assumed: consultation, planning and research in 2006 and 2007 followed by construction of most park related infrastructure in 2008 and A small amount of park related infrastructure (eg. expansion of the trail network and habitat preservation) would occur on an ongoing basis in subsequent years. With this development timetable in mind, four broad categories of investment benefits have been identified: investment in the national park itself; investment in hotels and campgrounds generated by visitors to the national park; investment in residential development by people moving into the study area; investment in other tourism related businesses. Each one of these investment benefits is quantified in turn below. 4.1 National Park Investment Based on discussions with Parks Canada staff, the initial investment required to get the proposed national park up and running is estimated at $10 million. This budget is expected to cover all aspects of the project including up front soft costs for things like park planning and environmental research as well as hard costs for infrastructure (trails, visitor reception centre, maintenance and administration buildings, etc.). This budget estimate is not intended to cover the ongoing operating costs for the park; these operating costs will be covered off in Section 6 of this report under the heading of income benefits. It is also not intended to include any land acquisition costs. With regards to land acquisition, Parks Canada acknowledge that a handful (less than ten) of privately owned ranches hold grazing leases within the possible park boundaries identified in Section 2 of this report. Most of these ranches are quite small with less than 100 head of cattle. The cost to buy out their leasehold grazing tenures, most of which will expire during the next 5-10 years, should be quite small. In a few cases, it may be necessary to purchase the entire ranch (at fair market value) if the business becomes unviable due to the loss of grazing tenures. For Parks Canada, the net cost to conclude such a transaction should also be quite small since it is expected that the home ranch (typically valley bottom lands that will fall outside the boundaries of the proposed national park) will be resold to defray as much of the initial purchase price as possible. Parks Canada have also indicated that it may be possible to purchase one or two large ranches located in whole or in part within the probable park boundaries identified in Section 2 of this report. The money to pay for these purchases (expected to be in the millions of dollars) would be in addition to the budget numbers cited above. ECONOMIC BENEFITS STUDY - 8

14 At the present time, development inside the park boundaries is expected to be minimal. Campgrounds similar to ones found at most other national parks in British Columbia may not be permitted. Some of the existing trails and access roads (eg. the unpaved road up to Mount Kobau) may be upgraded. The usual range of visitor support services (directional and interpretive signage, washrooms etc.) will be provided. A visitor reception centre as well as some Parks Canada administration offices and research/maintenance facilities will probably be developed at one or more locations in the impact area. With this possibility in mind, the following chart provides a very preliminary breakdown of the Parks Canada capital expenditure budget scenario cited above: Project Component Cost Factor Projected Cost visitor reception centre 5,000 $400 $ 2 million administration & research buildings 5,000 $200 $ 1 million maintenance buildings/works yard 5,000 $200 $ 1 million maintenance & research equipment allowance $ 1 million hiking trails & roads allowance $ 1 million habitat preservation allowance $ 1 million miscellaneous items allowance $ 1 million total hard costs $ 8 million soft costs 25% of hard costs $ 2 million total project cost $10 million It has been assumed that all of this money will be spent in the local area. With this assumption in mind, the first line of Table 1 that follows this section of the report allocates the $10 million on an annual basis over the ten year forecast period. This allocation reflects the development timetable noted above (ie. pre development planning in 2006 and 2007 followed by most of the park infrastructure construction in 2008 and 2009). 4.2 National Park Visitation Levels The Parks Canada study referenced in the preceeding section of this report determined that impacts associated with visitor spending in British Columbia far outweighed impacts associated with spending by Parks Canada. This suggests that the key determinant of indirect investment benefits (ie. investments in local communities triggered as a result of the national park development) will be the number of visitors to the proposed South Okanagan-Similkameen National Park Reserve. As the number of visitors increases, so too will private sector investment in a wide range of supporting tourism infrastructure including hotels, campgrounds, restaurants, wineries, gas stations, gift shops and so on. As a benchmark for the visitor projections presented below, the following chart provides historic data on visitation levels for the big four national parks in British Columbia: Kootenay, Yoho and Mount Revelstoke-Glacier in the Rocky Mountains region and Pacific Rim on the west coast of Vancouver Island. Comparable data is also shown for Waterton Lakes in Alberta as well as for Point Pelee and Bruce Peninsula in Ontario. Waterton Lakes is located approximately 250 kilometres south of Calgary. Point Pelee and Bruce Peninsula are located approximately 350 kilometres southwest and 250 kilometres northwest of Toronto respectively. The latter parks are considered good benchmarks for the South Okanagan park projections. Visitation levels can fluctuate significantly from one year to the next due to variations in weather and changing economic conditions. To smooth out these variations and get a more reliable long range estimate of visitation levels, the annual data has been converted into a five year average. ECONOMIC BENEFITS STUDY - 9

15 Average Annual Person Visits National Park Location Kootenay BC 1,783,000 Yoho BC 1,152,000 Pacific Rim BC 654,000 Mount Revelstoke BC 569,000 Waterton Lakes Alberta 402,000 Point Pelee Ontario 323,000 Bruce Peninsula Ontario 214,000 With these comparables in mind, the first column of the following chart provides a ten year forecast of potential visitation levels for the proposed South Okanagan-Similkameen National Park Reserve. This forecast reflects both the expected timing and the expected scale of park infrastructure development as outlined above. The second and third columns provide a breakdown of total visitation levels into overnight and same day visits. The ratios used--70% overnight and 30% same day--are similar to the percentages cited in the Parks Canada impact study referenced in Section 3 of this report. Overnight Same Day Year Annual Visits 70% 30% ,000 35,000 15, ,000 70,000 30, , ,000 45, , ,000 60, , ,000 75, , ,000 84, , ,000 90,000 This forecast of overnight and same day visits will be used in Section 4.3 that follows to determine the demand for additional hotel and campground accommodation in the local impact area, one of the more obvious indirect investment benefits associated with the proposed South Okanagan Similkameen National Park Reserve. 4.3 Accommodation Sector Investment A number of assumptions must be made in order to convert the overnight visitor projections shown above into indirect investment benefits. These assumptions are as follows: 80% of overnight visitors will stay in the local impact area (most of them in the four nearby communities of Penticton, Osoyoos, Oliver and Keremeos); the remaining 20% will stay overnight in communities further away including Princeton to the west, Kelowna to the north and Grand Forks to the east; of those visitors that overnight in the local impact area, 60% will stay in a hotel, 30% will stay in a campground and 10% will stay either in a B&B or with family and friends; the average party size will be 2.0 persons per hotel room and 3.0 persons per camp site; for hotel, the breakeven occupancy rate over a 12 month operating season will be 70%; ECONOMIC BENEFITS STUDY - 10

16 for campgrounds, the breakeven occupancy rate over a 6 month operating season (from May 1 to October 31) will be 50%; expansion of hotel accommodation capacity will occur in increments of 50 rooms, with construction occurring in the year preceding the breakeven level as determined based on the assumptions listed above; expansion of campground accommodation capacity will occur in increments of 50 sites, with construction occurring in the year preceding the breakeven level as determined based on the assumptions listed above; the cost to build hotel accommodation will increase by 3% per annum from a base year (2006) figure of $120,000 per room; the cost to build campground accommodation will increase by 3% per annum from a base year (2006) figure of $15,000 per site. Based on these assumptions, the increase in overnight visitors attributable to the proposed South Okanagan-Similkameen National Park Reserve will result in the following additions to the supply of accommodation in the local area: 50 hotel rooms and 50 campground sites in 2009; 50 hotel rooms and 50 campground sites in 2011; 50 hotel rooms and 50 campground sites in 2013; 50 hotel rooms and 50 campground sites in Based on this building programme and the capital cost estimates cited above, the second and third lines of Table 1 show that investment in the accommodation sector of the local area economy will amount to $6,5500,000 for hotels plus $800,000 for campgrounds in 2009, $6,950,000 for hotels plus $850,000 for campgrounds in 2011, $7,400,000 for hotels plus $900,000 for campgrounds in 2013 and $7,850,000 for hotels plus $1,000,000 for campgrounds in Over the entire ten year forecast period, total investment benefits for the hotel and campground sectors of the local area economy are projected at $28,750,000 and $3,550,000 respectively. 4.4 Residential Investment Based on discussions with economic development officers representing the four nearby communities of Penticton, Osoyoos, Oliver and Keremeos, one of the indirect benefits of the proposed national park reserve is an enhanced perception of the local study area as a place to live (either full time or part time). This expectation of a better quality of life will result in an increased level of in migration to the area, mostly from other regions of Canada. All of these in migrants will move into some form of residential accommodation. A certain percentage will either build a new single family home or buy a new multi-family unit (ie. a townhouse or a condominium apartment). With this expectation in mind, investment in the residential sector of the local area economy has been determined based on the following assumptions: demand for new housing will be linked to the number of visits to the national park (a simple proxy for the impact of this project on the lifestyle awareness of people that may consider moving into the study area; demand for new housing will occur at a rate of one dwelling unit per 20,000 park visitors; the mix of new housing construction will remain constant over the forecast period at 30% single family and 70% multi-family; the cost of single family housing will increase by 3% per annum from a base year (2006) figure of $375,000 (2,500 square feet times $150 per square foot); ECONOMIC BENEFITS STUDY - 11

17 the cost of multi-family housing will increase by 3% per annum from a base year (2006) figure of $225,000 (1,500 square feet times $150 per square foot). Based on the first two assumptions and the visitor projections set out above, demand for new housing in the study area resulting from the creation of the proposed South Okanagan- Similkameen National Park Reserve will increase slowly but steadily from a minimal three units in 2009 (one single family and two multi-family) to a still very modest fifteen units in 2015 (five single family and ten multi-family). To put these figures into perspective, the following chart shows the number of residential building permits issued in Penticton and Osoyoos on an annual basis over the past five years. Single Family Units Multi-family Units Penticton Osoyoos Penticton Osoyoos In any given year, residential investment equals the number of new housing starts as identified above times the unit cost of single family and multi-family construction. Based on this simple formula, the fourth line of Table 1 shows that the level of residential investment in the local area economy is projected to increase steadily from $902,000 in 2009 to $5,385,000 in Over the entire ten year forecast period, total investment benefits for the residential sector of the local area economy are projected at $22,640, Other Sector Investment The influx of visitors to the proposed South Okanagan-Similkameen National Park Reserve will trigger spin off investments in a number of tourism related sectors of the local area economy. Obvious linkages exist in a number of areas including: the recreation sector (everything from mini golf in Osoyoos to boat cruises in Penticton); the retail sector including all of the wineries along Highway 97 between Osoyoos and Oliver and all of the seasonal fruit stands near Osoyoos and Keremeos; cultural and sporting events (eg the Ironman triathalon and the Meadowlark festival); restaurants and bars; other tourist attractions such as the Grist Mill in Keremeos, the Nk Mip Desert Centre in Osoyoos and the Lake City Casino in Penticton; support services as gas stations and convenience food stores. Given the wide range of linkages identified above, it is not possible to identify specific indirect investment benefits in these other sectors of the local area economy. It is reasonable to assume, however, that these spin off investment benefits will be correlated to the growth in the number of visitors to the proposed national park reserve. With this expectation in mind, investment benefits in other sectors of the local area economy have been quantified based on two simple assumptions: investment will be triggered by an increase in visitation levels to the proposed national park reserve from one year to the next (ie. no investment will occur if the number of visitors declines or stays the same); ECONOMIC BENEFITS STUDY - 12

18 investment will increase by 3% per annum from a base year (2006) figure of $20 per additional visitor. Based on these assumptions and the visitor projections cited above, the fifth line of Table 1 shows that national park related investment in the non accommodation sectors of the local area economy will increase from $1,100,000 in 2009 to $1,250,000 in 2013 and then drop back to $750,000 in 2014 and $520,000 in Over the entire ten year forecast period, total investment benefits in the non accommodation sector of the local area economy are projected at $7,120, Total Investment Benefits Total investment benefits are defined for the purposes of this analysis as the sum of investment in the national park, in hotels and campgrounds, in new housing and in other (non accommodation) sectors of the local area economy. As the final column of Table 1 shows, total investment benefits over the ten year forecast period are projected at $72,060,000. The multiplier effect of a large capital project is often defined as the ratio of total investment to direct investment. In this case, direct investment refers to the $10,000,000 of capital expenditures for the national park itself. Based on this definition and the figures shown in the final column of Table 1, the proposed South Okanagan-Similkmeen National Park Reserve will have a multiplier effect of approximately 7:1 on the local area economy. 22-Jul-05 TABLE 1 PROJECTED INVESTMENT BENEFITS(1 Line # Investment Item National Park(2 $ 200,000 $ 300,000 $ 3,000,000 $ 3,000,000 $ 2,000,000 $ 1,000,000 $ 300,000 $ 200,000 $ - $ - $ 10,000,000 2 Hotel(3 $ - $ - $ - $ 6,550,000 $ - $ 6,950,000 $ - $ 7,400,000 $ - $ 7,850,000 $ 28,750,000 3 Campground(3 $ - $ - $ - $ 800,000 $ - $ 850,000 $ - $ 900,000 $ - $ 1,000,000 $ 3,550,000 4 Residential(3 $ - $ - $ - $ 902,000 $ 1,603,000 $ 2,436,000 $ 3,227,000 $ 4,337,000 $ 4,750,000 $ 5,385,000 $ 22,640,000 5 Other(3 $ - $ - $ - $ 1,100,000 $ 1,150,000 $ 1,150,000 $ 1,200,000 $ 1,250,000 $ 750,000 $ 520,000 $ 7,120,000 6 Total Investment Benefits $ 200,000 $ 300,000 $ 3,000,000 $ 12,352,000 $ 4,753,000 $ 12,386,000 $ 4,727,000 $ 14,087,000 $ 5,500,000 $ 14,755,000 $ 72,060,000 1) Development Consulting Group estimates. 2) Development Consulting Group estimates based on capital cost budget provided by Parks Canada. 3) Development Consulting Group estimates assuming the number of park visitors will increase from 50,000 in 2009 to 300,000 in ECONOMIC BENEFITS STUDY - 13

19 5. Employment Benefits South Okanagan Similkameen National Park Reserve This section of the report quantifies the employment benefits of the proposed South Okanagan-Similkameen National Park Reserve on the local area economy over the next ten years ( ). These employment benefits are tied directly to the investment benefits identified in Section 4 of this report. With this linkage in mind, the following employment benefits have been identified: construction and operating jobs related to the national park; construction and operating jobs related to hotels and campgrounds; construction jobs related to new housing development; construction and operating jobs in other sectors of the economy affected by national park visitors. Each one of these employment benefits is quantified in turn below. 5.1 National Park Employment Spending $10 million to develop the proposed national park reserve as per the preliminary budget set out in Section 4.1 of this report will generate a significant amount of direct employment. The number of jobs created during the pre opening phase of the project has been determined based on the following assumptions: the $2 million budget for soft costs will be spent as follows: $200,000 in 2006, $300,000 in 2007, $500,000 per annum in 2008 and 2009, $300,000 in 2010 and $200,000 in 2011; the $8 million budget for hard costs will be spent as follows: $2,500,000 per annum in 2008 and 2009, $1,700,000 in 2010, $800,000 in 2011 and $500,000 in 2012; professional fees, including wages for Parks Canada staff and fees for a wide range of outside consulting functions including planning, engineering, architecture, environmental research, First Nations accommodation and project management will account for 80% of the $2 million budget for soft costs; wages paid to construction workers will account for 40% of the $8 million budget for hard costs; wage rates will increase by 3% per annum from a base year (2006) average of $30 per hour for construction workers and $80 per hour for professional staff; employment is measured in full time equivalents, for example one person working 1,800 hours in a year (roughly 49 weeks times 37 hours per week) or two persons each working 900 hours in a year. To put these last two assumptions into perspective, the Port of Vancouver impact study cited in Section 3 of this report defines a full time job as equivalent to 1,832 hours of work per year. In its latest survey of employment, earnings and hours (February of 2005), Statistics Canada found that the average work week in the construction industry in British Columbia was 39.4 hours. Based on this work week and an average weekly earnings of $925.00, the average wage rate in the construction industry was just over $23 per hour. Based on these assumptions, the first line of Table 2 that follows this section of the report shows that construction employment directly related to the proposed national park reserve will jump from 1 full time equivalents in 2006 to 20 FTE in 2008 and 19 FTE in 2009 and then drop steadily thereafter as the development phase of the project comes to an end in Over the entire ten year forecast period, construction employment will amount to the full time equivalent of 64 person years of work. ECONOMIC BENEFITS STUDY - 14

20 In addition to these temporary construction jobs, ongoing operation of the proposed national park reserve will sustain a number of permanent jobs. According to Parks Canada staff, the annual operating budget for the proposed South Okanagan-Similkameen National Park Reserve is currently expected to range between $2-$3 million per annum. The two biggest line items in this operating budget are wages and benefits for staff and repairs and maintenance for buildings and equipment. With regards to the former, the payroll cost for a Parks Canada employee currently is currently about $50,000 per annum. With these figures in mind, the number of jobs created during the operating phase of the project has been determined as follows: the annual operating budget will start at $1,000,000 in 2008, jump to $2,000,000 in 2009 and $2,500,000 in 2010 and increase by 3% per annum thereafter; the labour share of this annual operating budget will remain constant at 60%; the payroll cost for a Parks Canada employee will increase by 3% per annum from a base year (2006) average of $50,000. Based on these assumptions, the second line of Table 2 shows that operating employment directly related to the proposed national park reserve will double from 11 full time equivalents in 2008 to 22 FTE in 2009, increase to 27 FTE in 2010 and then remain constant thereafter. Over the entire ten year forecast period, operating employment will amount to the full time equivalent of 195 person years of work. 5.2 Accommodation Sector Employment Based on the visitor projections set out in Section 4.2 of this report, the proposed national park reserve is expected to trigger the development of 200 additional hotel rooms and 200 additional campground sites in the local area during the next ten years. Like the proposed national park reserve, this new hotel and campground accommodation will generate a number of temporary jobs during the construction phase and a number of permanent operating jobs thereafter. The number of jobs created during the construction phase has been determined based on the following assumptions: investment in new hotel and campground accommodation during the period will total $28,750,000 and $3,550,000 respectively as identified in Table 1; the labour share of new hotel and campground investment (mostly professional fees and construction wages) will remain constant over the forecast period at 45%; labour costs will increase by 3% per annum from a base year (2006) average of $40 per hour (a blended rate of $80-$100 per hour for professional fees and $10- $30 per hour for construction wages); employment is measured in full time equivalents (eg. one person working 1,800 hours in a year or two persons each working 900 hours in a year). Based on these assumptions, the second line of Table 2 shows that new hotel construction will create the full time equivalent of 38 jobs in 2009, 2011, 2013 and 2015 for a total FTE of 150 over the entire ten year forecast period. The third line of Table 2 shows that new campground construction will create the full time equivalent of 5 jobs in 2009, 2011, 2013 and 2015 for a total FTE of 19 over the same ten year forecast period. In addition to these temporary construction jobs, ongoing operation of the new hotels and campgrounds will sustain a number of permanent jobs in the hospitality sector of ECONOMIC BENEFITS STUDY - 15

21 the local economy. The number of new hotel and campground jobs created during the operating phase of the project has been determined as follows: hotels will operate year round with an average staffing level of 0.10 FTE per room (eg. a 100 room hotel would have the equivalent of ten full time employees); campgrounds will operate six months of the year with an average staffing level of 0.03 FTE per site (eg. a 100 site campground would have the equivalent of six full time employees working for half the year); hotel and campground operations will begin in the year following construction (eg. if the first hotel is built in 2009, it will commence operations in 2010). Based on these assumptions, Table 2 shows that hotel operating employment will increase from the equivalent of 5 full time jobs in 2010 to 10 FTE in 2012 and to 15 FTE in Over the entire ten year forecast period, hotel operating employment will amount to the full time equivalent of 60 person years of work. Based on these same assumptions, Table 2 shows that campground operating employment will increase from the equivalent of 2 full time jobs in 2010 to 3 FTE in 2012 and to 5 FTE in Over the entire ten year forecast period, campground operating employment will amount to the full time equivalent of 20 person years of work. 5.3 Residential Sector Employment The proposed national park reserve is expected to trigger the development of 68 new single family and multi-family dwelling units in the local area during the next ten years. This new residential development will generate a number of temporary construction jobs. The number of residential construction jobs has been determined based on the following assumptions: investment in new residential construction during the period will total $22,640,000 as identified in Table 1; the labour share of new residential investment (mostly professional fees and construction wages) will remain constant over the forecast period at 45%; labour costs will increase by 3% per annum from a base year (2006) average of $40 per hour (a blended rate of $80-$100 per hour for professional fees and $10- $30 per hour for construction wages); employment is measured in full time equivalents (eg. one person working 1,800 hours in a year or two persons each working 900 hours in a year). Based on these assumptions, the fourth line of Table 2 shows that the number of jobs in residential construction will increase steadily from 5 FTE in 2009 to 26 FTE in Over the entire ten year forecast period, new residential construction will create the full time equivalent of 115 jobs. 5.4 Other Sector Employment As previously noted, the influx of visitors to the proposed South Okanagan-Similkameen National Park Reserve is expected to trigger spin off investments in a number of tourism related sectors of the local area economy other than accommodation. Given the wide range of possible investments, it is difficult to estimate both the construction and operating jobs associated with these other investments. It should also be noted that some operating employment will probably be created in the local area over the next ten years without any associated investment. To cite a simple example, a dramatic increase in the number of visitors to a wine shop may result in a physical expansion ECONOMIC BENEFITS STUDY - 16

22 of the premises (ie. a capital investment that would be accounted for in Table 1). A smaller increase in the number of visitors may, however, prompt the business owner to simply add staff or lengthen the operating hours, both of which create jobs without any capital investment. With this caveat in mind, the number of construction jobs created that are tied to investment in other sectors of the local economy has been determined based on the following assumptions: investment in other sectors of the local economy during the period will total $7,120,000 as identified in Table 1; the labour share of other investment will remain constant at 45% over the forecast period; labour costs will increase by 3% per annum from a base year (2006) average of $40 per hour; employment is measured in full time equivalents (eg. one person working 1,800 hours in a year or two persons each working 900 hours in a year). Based on these assumptions, the fifth line of Table 2 shows that construction activity in other sectors of the local economy will create the full time equivalent of 6 jobs from 2009 to 2013, dropping to 4 jobs in 2014 and 3 jobs in 2015 for a total FTE of 38 over the entire ten year forecast period. In addition to these temporary construction jobs, ongoing operation of these other activities (most of them tourist related businesses) will sustain a number of permanent jobs in the non hospitality sectors of the local economy. Given the wide variety of industries and occupations likely to be involved, the number of other new jobs created during the operating phase of the project has been determined based on the following assumptions: for employment tied to investment, the labour to capital ratio will increase by 3% per annum from a base year (2006) average of $200,000 per full time equivalent job; business operations will begin in the year following that in which the investment is made (eg. if a wine shop expands in 2009, it will hire additional staff in 2010); for employment tied to increased visitor spending, new jobs will be created at a rate of 1.0 FTE per 20,000 national park visitors throughout the forecast period. Based on these assumptions, Table 2 shows that operating employment related either to investment in sectors of the local area economy other than accommodation or to national park visitor spending will increase steadily from the equivalent of 3 full time jobs in 2009 to 43 FTE in Over the entire ten year forecast period, other operating employment will amount to the full time equivalent of 171 person years of work. 5.5 Total Employment Benefits Total employment benefits are defined for the purposes of this analysis as the sum of construction plus operating jobs in the national park, construction plus operating jobs in hotels and campgrounds, construction jobs in the residential sector and construction plus operating jobs in the non accommodation sectors of the local area economy. As Table 2 shows, total employment benefits over the ten year forecast period are projected at 832 FTE. Of this total employment effect, construction and ongoing operations account for 46% and 54% respectively. On the operating side, the national park accounts for 44% of the jobs created during the period; the accommodation sector (hotels plus campgrounds) and all of the other related businesses provide 18% and 38% of the operating jobs respectively. ECONOMIC BENEFITS STUDY - 17

23 22-Jul-05 TABLE 2 PROJECTED EMPLOYMENT BENEFITS(1 Line # Employment Item Construction - National Park( Construction - Hotel( Construction - Campground( Construction - Residential( Construction - Other( Operations - National Park( Operations - Hotel( Operations - Campground( Operations - Other( Total Employment Benefits ) Development Consulting Group estimates measured in terms of full time equivalent (fte) jobs. One fte job equals 1,800 hours of work in a year. 2) Development Consulting Group estimates based on the investment benefits identifed in Table 1. 3) Development Consulting Group estimates based on an annual operating budget increasing from $1,000,000 in 2008 to $2,500,000 in 2010 and by 3% per annum thereafter. 4) Development Consulting Group estimates based on an employment ratio of 0.10 fte per hotel room. 5) Development Consulting Group estimates based on an employment ratio of 0.03 fte per camp site. 6) Development Consulting Group estimates based on an employment ratio of 1.0 fte per $200,000 of investment plus 1.0 fte per 20,000 park visitors. table 2 assumptions local area share 80% labour share of soft costs 80% labour share of hard costs 40% labour share of total investment 45% 48% labour share of park operating costs 60% soft cost wage rate $80 $82 $85 $87 $90 $93 $96 $98 $101 $104 hard cost wage rate $30 $31 $32 $33 $34 $35 $36 $37 $38 $39 blended wage rate $40 $41 $42 $44 $45 $46 $48 $49 $51 $52 park soft costs $200,000 $300,000 $500,000 $500,000 $300,000 $200,000 park hard costs $0 $0 $2,500,000 $2,500,000 $1,700,000 $800,000 $500,000 fte hours 1,800 hotel employment ratio (fte per room) 0.10 camp employment ratio (fte per site) 0.03 park operating costs $0 $0 $1,000,000 $2,000,000 $2,500,000 $2,575,000 $2,652,000 $2,732,000 $2,814,000 $2,898,000 average park operating salary $50,000 $52,000 $53,000 $55,000 $56,000 $58,000 $60,000 $61,000 $63,000 $65,000 other investment/fte ratio $200,000 $206,000 $212,000 $219,000 $225,000 $232,000 $239,000 $246,000 $253,000 $261,000 visitor spending ratio (visits per fte) 20,000 visitor spending employment other investmentemployment ECONOMIC BENEFITS STUDY - 18

24 6. Income Benefits This section of the report quantifies the income benefits of the proposed South Okanagan- Similkameen National Park Reserve on the local area economy over the next ten years ( ). In this analysis, income is tied directly to employment (and vice versa). Accordingly, the following income benefits have been identified: construction and operating income related to national park jobs; construction and operating income related to jobs in the accommodation sector; construction jobs related to new home building; construction and operating income related to jobs in other sectors of the economy affected by national park visitors. Each one of these income benefits is quantified in turn below. 6.1 National Park Income Spending $10 million to develop the proposed national park reserve as per the preliminary budget set out in Section 4.1 of this report will generate a significant amount of construction income. The amount of income created during the construction phase of the project has been determined based on the following assumptions: the $2 million budget for soft costs will be spent as follows: $200,000 in 2006, $300,000 in 2007, $500,000 per annum in , $300,000 in 2010 and $200,000 in 2012; the $8 million budget for hard costs will be spent as follows: $2,500,000 million per annum in 2008 and 2009, $1,700,000 in 2010, $800,000 in 2011 and $500,000 million in 2012; employment income will account for 80% of soft costs (mostly professional fees) and 40% of hard costs (mostly construction wages). Based on these assumptions, the first line of Table 3 that follows this section of the report shows that construction income will jump from $160,000 in 2006 to $1,400,000 in 2008 and 2009 and then drop steadily thereafter as the development phase of the project comes to an end in Over the entire ten year forecast period, construction income will total $4,800,000. In addition to this construction income, the proposed national park reserve will generate ongoing operating income. Income earned during the operating phase of the project has been determined as follows: the annual operating budget will start at $1,000,000 in 2008, jump to $2,000,000 in 2009 and $2,500,000 in 2010 and increase by 3% per annum thereafter; the labour share of this annual operating budget will remain constant at 60%. Based on these two assumptions, Table 3 shows that operating income related to the proposed national park reserve will double from $600,000 in 2008 to $1,200,000 in 2009, increase to $1,500,000 in 2010 and then rise at a constant rate of 3% per annum thereafter. Over the entire ten year forecast period, operating income will total $11,502,000. ECONOMIC BENEFITS STUDY - 19

25 6.2 Accommodation Sector Income Based on the visitor projections set out in Section 4.2 of this report, the proposed national park reserve is expected to trigger the development of 200 additional hotel rooms and 200 additional campground sites in the local area during the next ten years. Like the proposed national park reserve, this new hotel and campground accommodation will generate both short term construction income and long term operating income. Construction income has been determined based on the following assumptions: investment in new hotel and campground accommodation during the period will total $28,750,000 and $3,550,000 respectively as identified in Table 1; the labour share of new accommodation investment (mostly professional fees and construction wages) will remain constant at 45% over the forecast period. Based on these assumptions, the second line of Table 3 shows that new hotel construction related income will amount to $2,948,000 in 2009, $3,128,000 in 2011, $3,330,000 in 2013 and to $3,533,000 in The third line of Table 3 shows that new campground construction related income will amount to $360,000 in 2009, $383,000 in 2011, $405,000 in 2013 and to $450,000 in Employment income associated with the ongoing operation of these new hotels and campgrounds has been determined as follows: hotels will operate year round with an average staffing level of 0.10 FTE per room (eg. a 100 room hotel would have the equivalent of ten full time employees); campgrounds will operate six months of the year with an average staffing level of 0.03 FTE per site (eg. a 100 site campground would have the equivalent of six full time employees working for half the year); hotel and campground operations will begin in the year following construction (eg. if the first hotel is built in 2009, it will commence operations in 2010); wages in the accommodation sector will increase by 3% per annum from a base year (2006) average of $35,000 per annum. To put this last assumption into perspective, the Statistics Canada survey of employment, earnings and hours for February of 2005 indicated that employees in the traveller accommodation industry in British Columbia earned an average of $709 per week. Based on these assumptions, line 7 of Table 3 shows that hotel operating employment income will increase each year from $195,000 in 2010 to $690,000 in Over the entire ten year forecast period, hotel operating employment income will amount to $2,600,000. Based on these same assumptions, line 8 of Table 3 shows that campground operating employment income will also increase each year from $78,000 in 2010 to $230,000 in Over the entire ten year forecast period, campground operating employment income will amount to $865,000. ECONOMIC BENEFITS STUDY - 20

26 6.3 Residential Sector Income The proposed national park reserve is expected to trigger the development of 68 new single family and multi-family dwelling units in the local area during the next ten years. This employment income associated with this construction activity has been determined based on the following assumptions: investment in new residential construction during the period will total $22,640,000 as identified in Table 1; the labour share of residential investment (mostly professional fees and construction wages) will remain constant at 45% over the forecast period. Based on these assumptions, the fourth line of Table 3 shows that residential construction employment income will increase each year from $406,000 in 2009 to $2,423,000 in Over the entire ten year forecast period, residential construction employment income will amount to $10,188,000, Other Sector Income As previously noted, the influx of visitors to the proposed South Okanagan-Similkameen National Park Reserve is expected to trigger spin off investments in a number of tourism related sectors of the local area economy other than accommodation. These spin off investments in everything from a new restaurant in Penticton to a new fruit stand in Keremeos to an expanded wine shop at one of the wineries between Osyoos and Oliver will also generate both short term construction income and long term operating income. Construction income has been determined based on the following assumptions: investment in other sectors of the local economy during the period will total $7,120,000 as identified in Table 1; employment income (mostly professional fees and construction wages) will account for 45% of other investment. Based on these assumptions, line 5 of Table 3 shows that construction related income in the other sectors of the local economy will increase from $495,000 in 2009 to $563,000 in 2013 before dropping to $338,000 in 2014 and to $234,000 in 2015 for a total of $3,206,000 over the entire ten year forecast period. Employment income associated with the ongoing operation of new and/or expanded national park visitor related activities has been determined as follows: business operations will begin in the year following that in which the investment is made (eg. if a wine shop expands in 2009, it will hire additional staff in 2010); wages in the other sectors of the local economy (including retail and restaurant) will increase by 3% per annum from a base year (2006) average of $41,000 per annum. To put this last assumption into perspective, the Statistics Canada survey of employment, earnings and hours for February of 2005 indicated that average earnings for employees in the retail trade industry in British Columbia was $828 per week. Based on these assumptions, line 9 of Table 3 shows that operating employment income related either to investment in sectors of the local area economy other than accommodation or to national park visitor spending will increase each year from $135,000 in 2009 to $2,279,000 in Over the entire ten year forecast period, other operating employment income will amount to $8,641,000. ECONOMIC BENEFITS STUDY - 21

27 6.5 Total Income Benefits Total income benefits are defined for the purposes of this analysis as the sum of construction plus operating income in the national park, construction plus operating income in the hotels and campgrounds, construction income in the residential sector and construction plus operating income in the non accommodation sectors of the local area economy. Based on this definition, the bottom line of Table 3 shows that total income benefits over the ten year forecast period are projected at $56,339,000. Of this total income effect, construction and ongoing operations account for about 58% and 42% respectively. On the operating side, the proposed national park reserve accounts for 49% of the income benefits generated during the period; the accommodation sector (hotels plus campgrounds) and all of the other related businesses provide 15% and 36% of the operating income respectively. ECONOMIC BENEFITS STUDY - 22

28 7. Expenditure Benefits South Okanagan Similkameen National Park Reserve This section of the report estimates the expenditure benefits of the proposed South Okanagan-Similkameen National Park Reserve on the local area economy over the next ten years ( ). In this analysis, two distinct categories of expenditure benefits have been identified: direct effects associated with spending by visitors to the national park; indirect effects associated with the construction and operating employment income as determined in Section 6 of this report. Each one of these expenditure benefits is quantified in turn below. 7.1 National Park Visitor Spending Patterns The Parks Canada economic impact study cited in Section 3 of this report concluded that impacts associated with visitor spending far outweighed impacts associated with Parks Canada spending. This conclusion was based in part on a survey of national park visitors to determine their spending patterns. The following chart summarizes the visitor expenditure data used in the Parks Canada economic impact model for British Columbia. This chart shows per day expenditures in 2001 for six spending categories and four visitor categories. All figures have been rounded to the nearest $1.00. Canada Canada USA Overseas Spending Category Same Day Overnight Overnight Overnight Public Transport $ 4 $ 4 $ 8 $ 8 Private Transport $ 7 $ 6 $ 14 $ 13 Accommodation $ 20 $ 19 $ 43 $ 41 Food & Beverage $ 14 $ 13 $ 29 $ 27 Recreation & Entertainment $ 7 $ 7 $ 16 $ 15 Retail & Other $ 8 $ 7 $ 17 $ 16 This chart shows that overnight visitors from the USA and overnight visitors from overseas have essentially the same spending patterns. It also shows that same day visitors from Canada and overnight visitors from Canada also have essentially the same spending patterns. This latter result, which reflects nearly identical levels of expenditure for accommodation and food as show above, is rather surprising since overnight visitors would normally be expected to spend a lot more on both of these travel related items. For the purposes of this analysis, the expenditure data summarized in this chart has been simplified into five spending categories and three visitor categories. More specifically, public transport expenditures have been ignored on the assumption that most of the spending in this category will occur outside of the local study area. The three visitor categories identified are same day visitors from Canada, overnight visitors from Canada and overnight visitors from outside Canada. ECONOMIC BENEFITS STUDY - 23

29 With these changes in mind, the following chart shows the base year (2006) daily spending patterns used to determine the expenditure benefits generated by visitors to the proposed South Okanagan-Similkameen National Park Reserve: Canada Canada USA/Overseas Spending Category Same Day Overnight Overnight Private Transport $ 8 $ 7 $ 16 Accommodation $ 0 $ 22 $ 50 Food & Beverage $ 16 $ 15 $ 34 Recreation & Entertainment $ 8 $ 8 $ 18 Retail & Other $ 9 $ 8 $ 19 In most cases, per diem expenditures have been increased by 15% to allow for inflation between 2001 and Spending on accommodation by same day visitors from Canada has been zeroed out to differentiate this segment of the tourist market from overnight visitors from Canada. In order to determine the expenditure benefits generated by visitors to the national park, total visits must be disaggregated into the three categories identified above. Based on the projections set out in Section 4.2 of this report, the number of same day Canadian visitors, overnight Canadian visitors and USA/overseas overnight visitors has been determined based on the following assumptions: overnight and day visitors will account for 70% and 30% respectively of total visits; all day visitors will come from Canada; Canadian and USA/overseas visitors will account for 70% and 30% respectively of total overnight visits. To put this last assumption into perspective, data collected by the Tourist Info Centre at Osoyoos for the 2004 calendar year shows that 71% of non local resident visitors were from Canada with the remaining 29% coming from the United States and overseas. Based on these assumptions, the following chart provides a breakdown of visitation levels to the proposed South Okanagan-Similkameen National Park Reserve into each one of the categories cited above: Canada Overnight Canada USA/Overseas Year Annual Visits Same Day Visits Overnight Overnight ,000 15,000 35,000 25,000 10, ,000 30,000 70,000 49,000 21, ,000 45, ,000 74,000 31, ,000 60, ,000 98,000 42, ,000 75, , ,000 52, ,000 84, , ,000 59, ,000 90, , ,000 63,000 ECONOMIC BENEFITS STUDY - 24

30 7.2 National Park Visitor Expenditures Using the breakdown of visitation levels as shown in the chart on the preceeding page, national park visitor expenditures have been determined based on the following assumptions: per capita expenditures in all spending categories will increase by 3% per annum from the base year (2006) levels cited above; 80% of all spending will occur in the local impact area (mostly in the four nearby communities of Penticton, Osoyoos, Oliver and Keremeos); the remaining 20% will occur in communities further away including Princeton to the west, Kelowna to the north and Grand Forks to the east. Note that the second assumption is consistent with the expectation that 80% of overnight visitors will stay in the local impact area--one of the assumptions used to determine the demand for additional hotel and campground accommodation in Section 4.3 of this report. Based on these assumptions, the first line of Table 4 that follows this section of the report shows that visitor spending on private transport in the local area will more than double from $398,000 in 2009 to $827,000 in 2010 and then increase steadily thereafter to reach $2,878,000 by The second line of Table 4 shows that visitor spending on accommodation in the local area will also more than double from $918,000 in 2009 to $1,916,000 in 2010 and then increase steadily thereafter to reach $6,664,000 by Similar trends are projected to visitor spending on food & beverage, recreation and retail. Over the ten year forecast period, national park visitors are expected to spend $27,776,000 on accommodation, $25,187,000 on food & beverage, $13,851,000 on retail, $13,186,000 on recreation and $11,999,000 on private transport in the local area. 7.3 Employment Expenditures Most of the construction and operating employment income identified in Section 6 of this report will be spent on goods and services. With this expectation in mind, expenditures associated with employment income have been determined based on the following assumptions: personal disposable income will amount to 75% of employment income (ie. payroll deductions for federal and provincial income tax, CPP contributions, EI premiums and other items will amount to 25% of employment income); personal spending on goods and services will amount to 95% of personal disposable income (ie. savings will amount to 5% of personal disposable income); 70% of all spending will occur in the local impact area (mostly in the four nearby communities of Penticton, Osoyoos, Oliver and Keremeos); most of the remaining 30% will be captured by bigger cities like Kelowna and Vancouver that have a much broader range of retail stores. To put this first assumption into perspective, a review of data compiled by the Canada Customs and Revenue Agency indicates that the big four payroll deductions--namely federal and provincial income tax plus CPP contributions and EI premiums--for taxable returns filed in British Columbia in 2002 (the most recent year available) added up to 24% of total income. To put this second assumption into perspective, a recent study released by Statistics Canada (publication xie) indicates that the personal savings rate in British Columbia, defined as the ratio of personal savings to personal disposable income, has been trending ECONOMIC BENEFITS STUDY - 25

31 steadily downwards from about 6% in 1992 to about -4% in For Canada as a whole, the personal savings rate in recent years has fluctuated between 5-10%. Based on these assumptions, line 6 of Table 4 shows that employment related spending in the local area will jump from $80,000 in 2006 to $3,463,000 in 2009, and then rise in an irregular pattern thereafter to reach $5,775,000 in Over the entire ten year forecast period, employment related spending in the local area will amount to $28,100, Total Expenditure Benefits Total expenditure benefits are defined for the purposes of this analysis as the sum of national park visitor spending plus employment related spending. Based on this definition, the bottom line of Table 4 shows that total expenditure benefits in the local area over the ten year forecast period are projected at $120,099,000. National park visitors account for about 76% of these total expenditure benefits. ECONOMIC BENEFITS STUDY - 26

32 8. Taxation Benefits This section of the report quantifies the taxation benefits of the proposed South Okanagan- Similkameen national park over the next ten years ( ). Whereas previous sections of this report have focussed on those benefits that accrue to the local study area, the taxation benefits identified below will flow primarily to the federal government in Ottawa and the provincial government in Victoria. With this difference in the geographic scope of the analysis in mind, taxation benefits have been aggregated under three general headings: federal government revenues; provincial government revenues; municipal/regional government revenues. All of these government revenues are related to the income benefits identified in Table 3 and the expenditure benefits identified in Table 4. With these linkages in mind, the taxation benefits for the federal, provincial and municipal/regional governments are quantified in turn below. 8.1 Federal Government Taxes The federal government will receive tax revenues from a variety of sources that are directly or indirectly related to the proposed national park. Major sources of federal government revenues over the ten year forecast period will include income tax on employment income, CPP contributions and EI premiums on employment income, GST on national park visitor and employment income related expenditures as well as national park user fees. With these sources of revenue in mind, taxes paid to the federal government have been determined based on the following assumptions: income tax will amount to 14% of construction and operating employment income; CPP contributions and EI premiums will amount to 3% of construction and operating employment income; GST will apply to 100% of national park visitor expenditures at a rate of 7%; GST will apply to 70% of employment income related expenditures at a rate of 7%; the excise tax on fuel will apply to 80% of national park visitor expenditures on private transport at a rate of 10 cents per litre; the price of gas will increase by 3% per annum from a base year (2006) figure of $1.00 per litre; the adult entry fee into the proposed national park will increase from $5.00 in 2009 to $6.00 in 2012 and to $7.00 in 2015; a 70% adjustment factor will be applied to the adult entry fee to allow for annual passes and family discounts. To put the first two assumptions into perspective, a review of data compiled by the Canada Customs and Revenue Agency indicates that net federal income tax and CPP contributions plus EI premiums amounted to 14% and 3% respectively of total assessed income for taxable returns filed in British Columbia in With regards to the third and fourth assumptions, all visitor expenditures are assumed to be subject to GST. Some of the employment income related expenditures, on the other hand, will be exempt from GST (one obvious example being food for home consumption). ECONOMIC BENEFITS STUDY - 27

33 For both categories, note that GST has been calculated on total expenditures and not just on the 80% local area share for visitors and the 70% local area share for employees shown in Table 4. With regards to the last two assumptions, Parks Canada is significantly increasing the cost of many services in national parks in order to generate additional funds to pay for repairs and maintenance of tourist and hiking facilities. At Banff and Jasper, for example, the daily adult fee has just recently been increased from $7.00 to $8.00 and will probably be raised to $10.00 by The annual fee for a family pass has just recently been increased from $89 to $109 and will probably be raised to $139 by At Pacific Rim, visitors pay for parking in lieu of a park entry fee. Parking rates at Pacific Rim National Park are currently $10.00 for a day pass and $45.00 for a season pass. Based on these assumptions, the first line of Table 5 that follows this section of the report shows that income tax revenues to the federal government are projected to increase from $22,000 in 2006 to $1,621,000 in The second line of Table 5 shows that CPP contributions and EI premiums are projected to increase from $5,000 in 2006 to $347,000 in Over the entire ten year forecast period, federal income tax and CPP contributions plus EI premiums will total $7,888,000 and $1,690,000 respectively. The third line of Table 5 shows that GST revenues to the federal government are projected to increase from $6,000 in 2006 to $2,335,000 in Over the entire ten year forecast period, GST revenues will total $10,017,000 of which 78% can be attributed to visitor spending and 22% to employment income related spending. The fourth line of Table 5 shows that fuel tax revenues to the federal government are projected to increase from $36,000 in 2009 to $221,000 in This is a conservative forecast since the analysis does not include any estimate of employment income related expenditures on private transport and fuel tax revenues related thereto. The fifth line of Table 5 shows that user fees paid by visitors to the proposed national park are projected to increase from $175,000 in 2009 to $1,470,000 in Over the entire ten year forecast period, park user fees will total $5,586,000. As the final column of Table 5 shows, park user fees are expected to be the third largest source of federal government tax revenue over the ten year forecast period, ranking behind GST and income tax. 8.2 Provincial Government Taxes The provincial government will also receive tax revenues from a variety of sources that are directly or indirectly related to the proposed national park. Major sources of provincial government revenues over the ten year forecast period will include income tax on employment income, PST on national park visitor and employment income related expenditures, fuel tax on gasoline sales, accommodation tax on hotel room sales and property transfer tax on housing sales. With these sources of revenue in mind, taxes paid to the provincial government have been determined based on the following assumptions: income tax will amount to 7% of construction and operating employment income; PST will apply only to national park visitor retail expenditures at a rate of 7%; PST will apply to 60% of employment income related expenditures at a rate of 7%; the tax on fuel will apply to 80% of national park visitor expenditures on private transport at a rate of 15 cents per litre; the price of gas will increase by 3% per annum from a base year (2006) figure of $1.00 per litre; ECONOMIC BENEFITS STUDY - 28

34 the hotel room tax will apply to 60% of national park visitor expenditures on accommodation at a rate of 8%; the property transfer tax will apply to all of the residential investment benefits identified in Table 1 plus a 30% gross up factor for land at a rate of 1% on the first $100,000 plus 2% on the balance of the combined land and building unit cost. To put the first assumption into perspective, a review of data compiled by the Canada Customs and Revenue Agency indicates that net provincial income tax amounted to 7% of total assessed income for taxable returns filed in British Columbia in With regards to the second assumption, PST is not charged on fuel, accommodation or food consumed in restaurants. With regards to the third assumption, some employment income related expenditures will be exempt from PST (eg. food for home consumption and clothing for children). With these exemptions in mind, note that PST has been calculated on total taxable expenditures and not just on the 80% local area share for visitors and the 70% local area share for employees shown in Table 4. With regards to the second last assumption, the provincial hotel room tax does not apply to campgrounds or RV parks. For the purposes of this analysis, it has been assumed that 60% of visitor spending on accommodation will be captured by taxable hotels and motels with the remaining 40% going to tax exempt campgrounds and RV parks. Once again, however, note that hotel room tax revenue has been calculated on total accommodation expenditures and not just on the 80% local area share for visitors shown in Table 4. With regards to the last assumption, the property transfer tax does not apply to first time home buyers. For the purposes of this analysis, it has been assumed that none of the residential investment identified in Table 1 will be attributable to first time home buyers. Based on these assumptions, line 6 of Table 5 shows that income tax revenues to the provincial government are projected to increase from $11,000 in 2006 to $810,000 in Over the entire ten year forecast period, provincial income tax will total $3,943,000. Line 7 of Table 5 shows that PST revenues to the provincial government are projected to increase from $5,000 in 2006 to $638,000 in Over the entire ten year forecast period, PST revenues will total $2,899,000 of which 38% can be attributed to visitor spending and 62% to employment income related spending. Line 8 of Table 5 shows that fuel tax revenues to the provincial government are projected to increase from $55,000 in 2009 to $331,000 in Once again, this is a conservative forecast since the analysis does not include any estimate of employment income related expenditures on private transport and fuel tax revenues related thereto. Line 9 of Table 5 shows that the provincial share of hotel room taxes paid by national park visitors is projected to increase from $55,000 in 2009 to $400,000 in Over the ten year forecast period, the provincial share of hotel room tax revenues will total $1,667,000. Line 10 of Table 5 shows that property transfer tax revenues to the provincial government are projected to increase from $20,000 in 2009 to $125,000 in As the final column of Table 5 shows, the property transfer tax is expected to be the smallest source of provincial government tax revenue over the ten year forecast period, ranking far behind income tax and PST as well as the fuel tax and the hotel room tax. ECONOMIC BENEFITS STUDY - 29

35 8.3 Municipal/Regional Government Taxes Municipal and regional governments in the local study area will also receive tax revenues from a variety of sources that are directly or indirectly related to the proposed national park. The two major sources of municipal and regional government revenues over the ten year forecast period will be property tax on residential and commercial development as well as accommodation tax on hotel room sales. With these sources of revenue in mind, taxes paid to municipal and regional governments in the local study area have been determined based on the following assumptions: property taxes will be determined based on a mill rate of $9.00 per $1,000 of assessed value for residential development and $20.00 per $1,000 of assessed value for commercial (business) development; property taxes will apply to all of the hotel, campground and residential investment benefits identified in Table 1 plus a 30% gross up factor for land; property tax payments for hotel, campground and residential projects will commence in the year following construction (eg. if the first hotel is built in 2009, it will start paying property taxes in 2010); the hotel room tax will apply to 60% of national park visitor expenditures on accommodation at a rate of 2%. To put the first assumption into perspective, the following chart shows the current (2005) mill rates for residential and commercial property in the City of Penticton and the Town of Osoyoos: Penticton Osoyoos Residential $ $ Commercial $ $ With regards to the third assumption, it should be noted that some municipalities in the study area (eg. Oliver) do not currently collect the 2% hotel room tax. By the time the first national park visitors arrive in 2009, all municipalities in the study area are expected to collect the 2% hotel room tax in order to help fund their tourism marketing plans. Based on these assumptions, Table 5 shows that the municipal government share of hotel room taxes paid by national park visitors is projected to increase from $11,000 in 2009 to $80,000 in Over the entire ten year forecast period, the municipal government share of hotel room tax revenues will total $334,000. Table 5 also shows that property tax revenues (most of which will accrue to local area municipalities and school districts) are projected to increase from $202,000 in 2010 to $812,000 in Over the entire ten year forecast period, property tax revenues will total $2,931,000, most of which will be paid by new hotel developments. 8.4 Total Tax Benefits Total tax benefits are defined for the purposes of this analysis as the sum of federal, provincial and municipal/regional government revenues. Based on this definition, the bottom line of Table 5 shows that total tax revenues over the ten year forecast period are projected at $39,919,000. Of this total tax revenue, the federal government will capture 66%, followed by 26% to the provincial government and 8% to local and regional governments. ECONOMIC BENEFITS STUDY - 30

36 22-Jul-05 TABLE 3 PROJECTED INCOME BENEFITS(1 Line # Income Item Construction - National Park(2 $ 160,000 $ 240,000 $ 1,400,000 $ 1,400,000 $ 920,000 $ 480,000 $ 200,000 $ - $ - $ - $ 4,800,000 2 Construction - Hotel(2 $ - $ - $ - $ 2,948,000 $ - $ 3,128,000 $ - $ 3,330,000 $ - $ 3,533,000 $ 12,939,000 3 Construction - Campground(2 $ - $ - $ - $ 360,000 $ - $ 383,000 $ - $ 405,000 $ - $ 450,000 $ 1,598,000 4 Construction - Residential(2 $ - $ - $ - $ 406,000 $ 721,000 $ 1,096,000 $ 1,452,000 $ 1,952,000 $ 2,138,000 $ 2,423,000 $ 10,188,000 5 Construction - Other(2 $ - $ - $ - $ 495,000 $ 518,000 $ 518,000 $ 540,000 $ 563,000 $ 338,000 $ 234,000 $ 3,206,000 6 Operations - National Park(3 $ - $ - $ 600,000 $ 1,200,000 $ 1,500,000 $ 1,545,000 $ 1,591,000 $ 1,639,000 $ 1,688,000 $ 1,739,000 $ 11,502,000 7 Operations - Hotel(4 $ - $ - $ - $ - $ 195,000 $ 205,000 $ 420,000 $ 430,000 $ 660,000 $ 690,000 $ 2,600,000 8 Operations - Campground(4 $ - $ - $ - $ - $ 78,000 $ 82,000 $ 126,000 $ 129,000 $ 220,000 $ 230,000 $ 865,000 9 Operations - Other(5 $ - $ - $ - $ 135,000 $ 460,000 $ 864,000 $ 1,225,000 $ 1,650,000 $ 2,028,000 $ 2,279,000 $ 8,641, Total Income Benefits $ 160,000 $ 240,000 $ 2,000,000 $ 6,944,000 $ 4,392,000 $ 8,301,000 $ 5,554,000 $ 10,098,000 $ 7,072,000 $ 11,578,000 $ 56,339,000 1) Development Consulting Group estimates. 2) Development Consulting Group estimates based on the investment benefits identifed in Table 1. 3) Development Consulting Group estimates based on an average salary of $50,000 in 2006, increasing by 3% per annum thereafter. 4) Development Consulting Group estimates based on an average salary of $35,000 in 2006, increasing by 3% per annum thereafter. 5) Development Consulting Group estimates based on an average salary of $41,000 in 2006, increasing by 3% per annum thereafter. table 3 assumptions average accommodation salary $35,000 $36,000 $37,000 $38,000 $39,000 $41,000 $42,000 $43,000 $44,000 $46,000 average retail salary $41,000 $42,000 $43,000 $45,000 $46,000 $48,000 $49,000 $50,000 $52,000 $53, Jul-05 TABLE 4 PROJECTED EXPENDITURE BENEFITS(1 Line # Expenditure Item Visitors - Private Transport(2 $ - $ - $ - $ 398,000 $ 827,000 $ 1,274,000 $ 1,756,000 $ 2,256,000 $ 2,610,000 $ 2,878,000 $ 11,999,000 2 Visitors - Accommodation(2 $ - $ - $ - $ 918,000 $ 1,916,000 $ 2,947,000 $ 4,066,000 $ 5,221,000 $ 6,044,000 $ 6,664,000 $ 27,776,000 3 Visitors - Food & Beverage(2 $ - $ - $ - $ 835,000 $ 1,737,000 $ 2,675,000 $ 3,685,000 $ 4,736,000 $ 5,478,000 $ 6,041,000 $ 25,187,000 4 Visitors - Recreation(2 $ - $ - $ - $ 437,000 $ 909,000 $ 1,400,000 $ 1,930,000 $ 2,479,000 $ 2,868,000 $ 3,163,000 $ 13,186,000 5 Visitors - Retail(2 $ - $ - $ - $ 459,000 $ 955,000 $ 1,471,000 $ 2,027,000 $ 2,604,000 $ 3,013,000 $ 3,322,000 $ 13,851,000 6 Employees - All Items(3 $ 80,000 $ 120,000 $ 998,000 $ 3,463,000 $ 2,191,000 $ 4,140,000 $ 2,770,000 $ 5,036,000 $ 3,527,000 $ 5,775,000 $ 28,100,000 7 Total Expenditure Benefits $ 80,000 $ 120,000 $ 998,000 $ 6,510,000 $ 8,535,000 $ 13,907,000 $ 16,234,000 $ 22,332,000 $ 23,540,000 $ 27,843,000 $ 120,099,000 1) Development Consulting Group estimates. 2) Development Consulting Group estimates assuming the number of national park visitors will increase from 50,000 in 2009 to 300,000 in 2015 and that per capita visitor expenditures will increase by 3% per annum after ) Development Consulting Group estimates based on the income benefits identified in Table 3. ECONOMIC BENEFITS STUDY - 31

37 9. Potential Negative Impacts South Okanagan Similkameen National Park Reserve The proposed South Okanagan-Similkameen National Park Reserve may have some negative impacts on the local area economy. Based on discussions with several local area residents and business representatives, the three most significant possible negative impacts appear to be: a possible restriction or alteration on operations of a helicopter flight training business based in Penticton; a restriction on a guide outfitting business operating in the Snowy Protected Area; cancellation of grazing licences in the national park reserve. Each one of these possible negative impacts is dealt with in turn below. 9.1 Impact On Helicopter Flight Training Business Several helicopter companies currently fly out of the Penticton airport. The largest by far is Canadian Helicopters, a privately owned company that operates a flight training school based at the Penticton airport. According to company management, the Penticton operation of Canadian Helicopters has about a dozen employees (including 7 instructors) and annual revenues of between $3-$4 million. Most of this revenue is generated by advanced mountain flight training programmes that are recognized around the world. Each year, between pilots take a variety of courses that typically start in September and end in June. Over half of these pilots come from outside Canada. Flight training takes place at a number of locations in Cathedral Lakes Provincial Park as well as in the Snowy and Grasslands Protected Areas. In all three areas, the company has negotiated access permits with the provincial government that allow flight training outside of the summer tourist season (July and August) when campers and hikers are most likely to be present. Cathedral Lakes, Snowy and Grasslands provide a unique combination of low, medium and high altitude training areas all located within a short flying time of the Penticton airport. Company management are of the opinion that a national park reserve designation would result in Snowy and Grasslands becoming no fly zones. Should this occur, the operations and profitability of the business would be significantly compromised and the Penticton base might be closed. As a result of public open houses and follow up meetings held in the Penticton area during the past year, Parks Canada staff is well aware of the negative impact that the proposed national park reserve could have on Canadian Helicopters. Parks Canada staff has suggested that flight operations in the proposed national park reserve could be grandfathered in accordance with the existing provincial access permits described above. In this case, disruption to the ongoing operations of the company would be minimal. At the present time, it is impossible to predict how this issue will be resolved. Under the best case scenario, the proposed South Okanagan-Similkameen National Park Reserve will not have any negative impacts on Canadian Helicopters; operating revenues might actually increase as a result of new business from Parks Canada. Under the worst case scenario, the company will shut down its Penticton base and move its flight training programme to another airport in Canada or the United States. ECONOMIC BENEFITS STUDY - 32

38 Such an outcome would result in a loss of jobs and related spending as well as taxation benefits for the local area economy in general and for the City of Penticton in particular. As noted above, the Penticton operation of Canadian Helicopters currently generates between $3-$4 million in revenue on an annual basis. To put this figure into perspective, a 100 room hotel with a 70% occupancy rate that charges an average of $100 per night would generate $2.5 million of revenue annually. At the present time, the company pays approximately $5,000 per annum in land lease payments to the federal government and approximately $5,000 per annum in property taxes to the City of Penticton. Canadian Helicopters accounts for about half of all traffic movements at the Penticton airport and pays between $20,000-$30,000 per annum in landing fees. If the company were to shut down in 2009 when the first visitors to the proposed national park reserve are expected, property tax losses to the City of Penticton would amount to approximately $35,000 during the period. By comparison, total municipal property tax benefits identified in Table 5 over this same time frame are projected at $2,931,000. Although only a portion of this total amount will accrue to the City of Penticton, it should be more than enough to offset the property tax losses identified above. 9.2 Impact On Guide Outfitting Business A guide-outfitting business currently conducts a portion of its trophy hunting operations in the Snowy protected area. Since non native hunting will not be permitted in the proposed national park reserve, and since the trophy animals being hunted in this area are not often found elsewhere in the South Okanagan-Similkameen Region, one solution to the loss of business resulting from hunting restrictions would be financial compensation. According to information provided to the consultant, the guide-outfitting business in question is a small family run seasonal operation with no outside full time employees. This being the case, the negative impacts associated with a shrinkage or a buyout of this business (eg. a loss of hunting licence revenue to the provincial government, a reduction in employment related spending in local area communities) will be minimal as compared to the economic benefits identified in the previous sections of this report. As a final comment on the impact to this particular business, it should be noted that the boundaries of the proposed national park reserve have yet to be determined. If the Snowy protected area does not become part of the national park reserve, then presumably its impact on this guide-outfitting business would be insignificant. 9.3 Impact On Ranching Operations According to the provincial government staff based in Penticton, approximately ten ranches have grazing licences on Crown land located in the areas of interest for the proposed national park reserve. Permission to use these grazing lands is conferred by way of short term (ten year) licences with the provincial government. In theory at least, these grazing permits may be terminated by the provincial government without compensation upon the expiry date of the licence. Licence revenues to the provincial government are currently based on a fee of $2.50 per animal unit month. Based on a maximum population of approximately 6,000 animal units and an average grazing period of four months per year, licence revenues to the provincial government from the potentially impacted ranches are estimated at $60,000 per annum. ECONOMIC BENEFITS STUDY - 33

39 According to one local area rancher, the loss of these grazing licences would jeopardise the ongoing viability of the business. Without access to Crown land, some ranches located on freehold land might be subdivided and/or converted into hobby farms (eg. Stump Lake Ranch). For ranches located on First Nations land, the only alternative might be to grow hay--a less intensive and less profitable land use than cattle. As with the guideoutfitting business described above, Parks Canada has indicated that financial compensation would be provided to ranchers. While financial compensation can offset most of the negative impacts for the business owner, the conversion of ranches to some other form of agribusiness or hobby farms may still have adverse effects on the economy of the local area. In this particular instance, the drop in cattle production could, according to one rancher, spell the demise of a small stockyard in OK Falls and a bull testing station in Keremeos. These two businesses provide a significant economic stimulus to their respective communities. A small number of suppliers to the industry (eg. hardware and feed stores, irrigation equipment manufacturers) would also be adversely affected. Offsetting these potential negative impacts are potential positive impacts associated with the conversion of ranches to some other form of agribusiness or hobby farms. The former may result in additional investment in plant and equipment as well as additional employment (the small existing ranches provide little if any non owner related jobs). The latter may result in a greater resident population with all of the associated spinoff benefits for local area providers of goods and services. ECONOMIC BENEFITS STUDY - 34

40 10. First Nations Impacts South Okanagan Similkameen National Park Reserve Parks Canada discussions with First Nations are in the very early stages and the manner in which negotiations will evolve is completely unknown at this time. The proposed South Okanagan-Similkameen National Park Reserve may have a number of positive impacts on local area First Nations. By virtue of their proximity to the proposed national park reserve, the Osoyoos Indian Band and the Lower Similkameen Indian Band in particular stand to benefit both directly and indirectly from this project. The Osoyoos Indian Band currently owns and operates a number of small to medium size businesses in Oliver and Osoyoos. These include: the Nk Mip campground and RV park; the Nk Mip Cellars winery; the Nk Mip Desert Heritage Centre; the Inkameep Desert Canyon golf course; Inkameep Construction and Oliver Readi Mix; the Nk Mip convenience store and gas bar. In addition, the Osoyoos Indian Band leases land to a number of arms length businesses including the Sonora Dunes golf course, the Spirit Ridge resort and spa and a trail ride operator. The campground, the winery, the desert heritage centre and the golf courses all depend to a significant extent on tourists visiting the South Okanagan Region. As a result, operating revenues for all of these businesses should be positively affected by the increasing number of tourists drawn to the region by the proposed South Okanagan-Similkameen National Park Reserve. In some cases (eg. the winery and the desert heritage centre), more visitors will probably result in more jobs and more employment income for band members. As noted in Section 4 of this report, the initial capital investment for the proposed South Okanagan-Similkameen National Park Reserve is currently estimated at $10 million. A significant portion of this budget will probably be spent on a visitor reception centre, Parks Canada administration offices, trails and research/maintenance facilities. Although the size and location of these buildings remains to be determined, one possibility is to partner with the Osoyoos Indian Band and expand their desert interpretive centre (a 10,000 square foot building currently under construction on reserve land just outside of Osoyoos) to accommodate some of the activities normally located in stand alone national park facilities. Such a building partnership could provide some capital and operating cost savings for Parks Canada as well as significant revenue and employment opportunities for the Osoyoos Indian Band. The Lower Similkameen Indian Band owns a partially built 50 site campground and pow wow grounds located on the Ashnola River just south of Keremeos. Since current plans for the proposed South Okanagan-Similkameen National Park Reserve do not include any on site accommodation, the Ashnola campground is ideally situated to attract overnight visitors. Based on a number of consulting reports, the Lower Similkameen Indian Band is considering partnerships for eco tourism businesses as well as First Nations arts and crafts. The viability of these enterprises would all benefit from the increased tourist traffic associated with the proposed South Okanagan-Similkameen National Park Reserve. ECONOMIC BENEFITS STUDY - 35

41 Last but not least, the Upper Similkameen Indian Band is currently spearheading a multimillion dollar plan to restore the historic Mascot Mine at Hedley as a major tourist attraction. The long term vision for this project includes the renovation and restoration of several buildings at the mine site, the development of a visitor reception/interpretive facility (the Snaza ist Centre) on the old mill site in Hedley and tours of the former ochre mines in the Princeton area. Supporting tourism infrastructure including an RV park and a nine hole golf course may also be developed in Hedley to compliment the Mascot Mine project. Although Hedley is located outside the study area for this study, a significant percentage of the visitors to the proposed national park reserve are expected to travel through this community via Highway 3 on their way to/from the Lower Mainland. As a result, the viability of the Mascot Mine project (as well as its employment and income potential for band members) will be enhanced as a direct result of the increased tourist traffic generated by the proposed South Okanagan-Similkameen National Park Reserve. ECONOMIC BENEFITS STUDY - 36