Forest Investment Account (FIA) - Forest Science Program
FIA Project Y081059

    Institutional Mechanisms for the Spatial and Inter-Temporal Transfer of Fiscal Capacity in Rural British Columbia
Project lead: Hoberg, George (University of British Columbia)
Author: Hoberg, George
Subject: Forest Investment Account (FIA), British Columbia
Series: Forest Investment Account (FIA) - Forest Science Program
While natural resources have provided a historical source of great wealth for British Columbia, resource dependence has created some significant challenges. The massive expansion of resource development strategies over the course of the past four decades has led to significant depletion of those same resources upon which the province depends so heavily (Cashore, 2005; Hutton, 2002). In addition, economic dependence on forest resources in rural communities has been linked to increased unemployment and poverty (Leake et al 2006) At the same time, the threat of global warming has escalated. While specific impacts remain largely uncertain, it is generally understood that forest dependent communities will be strongly affected by the impending changes. As the Ministry of Forests and Range (2006: iii) has noted, “…many communities are heavily reliant on the forest sector market economy. Increased fire and pests, along with inability of trees to adapt to the new climate regime may result in a reduction of timber supply, which would have wide ranging effects on local industries and communities.” Climate change impacts may also affect other forest based activities such as recreation or the use of non-timber forest products, further intensifying socio-economic impacts on these communities (2006). The impacts of climate change are already disturbingly visible in the interior of the province, where climactic shifts have magnified the effects of the mountain pine beetle. By 2005 the beetle had affected 7 million hectares of land, and is projected to kill over 80% of merchantable lodgepole pine throughout the province (McGarrity and Hoberg, 2005). The significant reduction in harvesting and wood processing that is anticipated following the end of beetle salvage harvesting promises to have profound implications for rural British Columbia and strongly indicates the need for diversification of the rural economic base. Regional diversity, uncertainty around future conditions and the need for long-term planning and funding suggests the need for institutional mechanisms that are able to transfer fiscal capacity on both a regional and inter-temporal basis. While similar observations have frequently been made in the literature, there has been surprisingly little analysis of the specific alternative instruments available to address these conditions. This research proposes to address this gap by asking: what are the most appropriate mechanisms by which to transfer fiscal capacity to rural British Columbia on a regional and inter-temporal basis? The most common responses to threats to community stability posed by major changes in the traditional resource base often involve funding disbursements by government to a region or community. Recent examples of this in British Columbia include the Mountain Pine Beetle Emergency Response: Canada-B.C. Implementation Strategy. Worth over $200 million dollars, this fund includes a $13 million dollar, three-year commitment to help impacted communities and First Nations diversify and stabilise their economies in the post-beetle era (Province of British Columbia, 2005). Unfortunately, large funds such as these often fall prey to two conditions: governmental inclination and/or short-lived disbursement periods. In occurrences where government funds are allocated it is generally due to the political inclinations of the majority party. Disbursements can be administered through processes such as annual allocations or multi-year budget commitments. Use of these methods, however, allows financial authority to rest with the government and leaves funds highly sensitive to the political inclinations of the dominant party in the legislature. Thus, majority party shifts leave previous financial commitments open to cancellation. As is the case with the mountain pine beetle emergency response monies, fiscal disbursement may also be restricted such that it only occurs over a short-term basis. While such timeframes may be appropriate in certain situations, economic diversification and environmental rehabilitation are lengthy and complex processes and as such, often require corresponding financial commitments. Not all funding mechanisms are necessarily subject to the vagaries of political life, however. Several models of trusts create the potential for greater institutional stability than the traditional approaches used within BC. Specific examples include: - The Northern Development Initiative Trust, which was established in 2004 to provide economic development opportunities for central and northern BC (Northern Trust, 2006). - The Columbia Basin Trust, which was established in 1995 to benefit residents of the Columbia basin affected by the construction of three dams along the Columbia River (CBT, 2003). - The newly formed Coast Sustainability Trust, which has been created to mitigate adverse effects resulting from land use decisions made on the Central and North coasts and in the Queen Charlotte Islands (MSRM, 2002: 4). - The BC Forestry Revitalization Trust, which was established in 2003 with the intent that it will provide mitigation for workers and contractors who have been negatively affected by the tenure take back under the BC Forestry Revitalization Act (BCFRT, 2004). Rural British Columbia is at a crossroads. The uncertainty of impacts on forest management resulting from the mountain pine beetle and global warming indicate a strong need for increased rural capacity and diversity. This in turn suggests two things: - the need for multi-faceted development strategies and programs, and - long-term funding commitments with which to support such efforts. Superficially at least, fiduciary trust arrangements appear to satisfy these conditions. The relatively unexplored nature of the trust in a community development context, however, suggests that there are a number of questions that need to be addressed. Significant among these are: - How well is a trust able to distribute funds appropriately across regions as well as time? - What are characteristics that support and/or impede such efforts? - What are the characteristics that are most important for a trust to have in the context of rural community development as compared to other venues? This research proposes to address these questions through a detailed study of the different mechanisms that are available for the transfer of fiscal capacity. Broad characteristics, strengths and weaknesses, and factors accounting for success and failure within these mechanisms will be examined, particularly with reference to fiduciary trust arrangements. In particular, this study will: 1. Highlight the strengths and weaknesses of a range of financial mechanisms 2. Assess the ability of these mechanisms to adequately transfer fiscal capacity 3. Develop policy options for an appropriate mechanism by which to transfer fiscal capacity across rural British Columbia 4. Provide guidance for future research needs


Final Report (81Kb)

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Updated August 16, 2010 

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