The age of affluence

Newfoundland and Labrador is awash in petro wealth, and a heady list of mega-projects could attract people back to the province. Has its ship finally come in? Grigor Bersinksi stands in the old bank vault showing off the riches on the silver shelves.

by Rob Antle

Grigor Bersinski stands in the old bank vault showing off the riches on the silver shelves. The vault is not lined with bars of gold, but rather with bottles of bubbly and other liquid elixirs—some Cristal here, Moët there. Two decades ago, the Bank of Nova Scotia vacated this building on Water Street in the heart of downtown St. John’s for a nearby office tower. Save for a brief reincarnation as an early 1990s dance bar, the old building sat largely unwanted and unused. A local developer picked it up at a city tax auction in 2004, for the princely sum of $225,000—less than half its assessed value at the time, and less than one-third of the back-property taxes owed.

A year ago, Bersinski and business partner Cyndi Lundrigan selected the still-abandoned bank as the perfect choice for their new fine dining venture. The renovated bottom floor is sleek and urban, all black, cream, and vermilion. The Vault Restaurant and Champagne Bar, with the help of three additional co-owners, opened last summer and has been thriving since. “Obviously it was a good idea, and obviously it did work well and this is the result,” says Bersinski, the restaurant’s executive chef.
 
The pair weren’t worried that St. John’s might not have been ready for another high-end restaurant. Bersinski, a Bulgarian, had witnessed many changes in the city since defecting at the airport in Gander, N.L., as a political refugee in 1990. He spent his early years in Canada as a cleaner, then as a baker at Tim Hortons, before embarking on a 15-year career at Bianca’s, a St. John’s fine dining mainstay.
 
Bersinski knew the business clientele was there to support the new venture, but he didn’t expect to see other clients, those in the 20-something age bracket. “I was pleasantly surprised to see young people,” he says. “I said to Cyndi, ‘See, we’re getting the new blood here, which is good.’ Obviously that is an indication of where Newfoundland is going. It’s going one step up now.”
 
Times are changing in Newfoundland and Labrador’s capital city. In the late-1990s, St. John’s troubadour Ron Hynes co-wrote “No Change in Me,” a wistful paean to troubled times and the economic diaspora emptying Newfoundland and Labrador and its craggy capital city. Hynes and collaborator Murray McLauchlan lamented how you could shoot a cannon down the middle of Bond Street and attract no attention in downtown St. John’s.
 
Fortunately, those times are over. Today that same artillery round would land within shrapnel range of a $1.2-million estate home with private elevator and mezzanine library. Unemployment in St. John’s is at a generational low, hovering at around 7%. Provincial population loss remains a concern, down 60,000 from its peak level in 1991, but Newfoundland and Labrador recorded a net increase in residents for the last three months of 2007, reversing a consecutive 16-quarter slide. In addition, last year St. John’s reported economic growth of 9.7%.
 
Now the province’s traditional pessimism, usually as prevalent as its spring fog, is showing signs of lifting. A late 2007 Bristol Omnifacts poll found that 53% of those surveyed in the province felt the economy was good or excellent, nearly double the number who gave the same response earlier in the year.
 
Carl Sheppard has noticed those changes firsthand. At 45, he has lived in St. John’s his entire life, save for his studies at universities in Nova Scotia and Ontario. He is the president and managing director of Strategic Concepts Inc., a local firm specializing in business planning, financial modelling, and business development. Strategic Concepts counts among its clients Chevron Canada Resources, De Beers Canada Inc., and the Iron Ore Company of Canada.
 
When Sheppard drives around St. John’s, he marvels at the little things that show renewed pride of ownership, such as the rock walls springing up in new subdivisions and on older streets. “Years ago you wouldn’t have had the discretionary income to spend $5,000 or $6,000 on [things like rock walls],” he says, “but now you see it.”
 
For St. John’s, the current circumstances are as good as it gets. “It’s better than I can remember,” says Sheppard. “I can’t recall so much optimism in the city.” Gurgling worldwide demand for commodities—namely, oil—is responsible for the prosperity, with petro bucks stuffing the provincial treasury and the pockets of industry employees. In 1998-99, all natural resources taxes and royalties accounted for less than $30 million in revenues for the provincial government. The most recent estimates available for 2007-08, by contrast, put oil royalties alone at $1.6 billion—a figure $562 million higher than first estimated. And that number will likely rise even more when the final tally comes in, with oil spiralling above $100 (U.S.) a barrel at the end of the fiscal year. Provincial mining taxes and royalties were expected to total $347 million, more than 50% higher than initial projections. Together, that’s a minimum of $2 billion in natural resources revenue that didn’t exist a couple of years ago.
 
Tom Marshall, Newfoundland and Labrador’s normally staid finance minister, provided an unusually frisky assessment of the reversal of fortune. The province will officially relinquish “have-not” status in the federal equalization program next year; meanwhile, traditional powerhouses such as Ontario are struggling and in danger of slipping from the “have” territory. Asked by reporters in December what effect that change will have on the psyche of Newfoundlanders and Labradorians, Marshall replied: “We will extend the hand of friendship to our good friends in Ontario. We will conduct job fairs there to tell people in Ontario there’s going to be lots of opportunity in Newfoundland and Labrador. And we will welcome their citizens to come here and take part in Newfoundland and Labrador society.”
 
That society is also changing. For a city whose culinary tastes once revolved around fish, brewis, and fat fryers, the restaurant scene is enjoying a renaissance. You can eat at an Australian fusion resto-café run by two Aussie sisters who lived here as teenagers or at a Japanese restaurant opened by a Nobu-trained chef. There is authentic Thai, Indian, and Greek fare. Just up the hill from downtown, at the city-centre Sobeys supermarket, you can pick up your Corn Flakes and, if you so desire, buy a $3,000 bottle of 1961 Chateau Haut Brion at the attached liquor store.
 
As for housing prices? They’re hot. Last summer the Newfoundland and Labrador government and the Hebron Ben Nevis consortium—Chevron Canada, ExxonMobil Canada, Petro Canada, and Norsk Hydro Canada—signed a memorandum of understanding to develop the province’s fourth oil field. No formal deal has been inked, but the long-awaited news sent the market into a frenzy. “Since the announcement, the real estate market has spiked with tremendous optimism from buyers betting on increased values in coming years,” noted St. John’s–based advisory and appraisal firm Kirkland, Balsom & Associates (KBA) in its 2008 market report. “This ‘need to buy now’ mindset has spurred multiple offers on properties, often at above perceived market value.”
 
According to KBA, 2008 promises to be a “robust” year for residential real estate, with CMHC projecting a 7.6% increase and private firms predicting jumps in the double digits. But while economic indicators float higher and higher on the waves of offshore oil, there are reasons for concern. With prosperity comes a whole new set of challenges. Drugs, for one. Royal Newfoundland Constabulary chief Joe Browne told the St. John’s Telegram in March that the force hopes to double its drug-enforcement team. “It’s definitely increasing,” Browne said of the burgeoning problem. “It’s a lucrative market.” The increase in the drug trade is showing up in other crime rates too, such as theft and other property offences.
 
And not everyone has been carried along by the waves of good times. This spring and summer, the Newfoundland and Labrador Federation of Labour is organizing a series of Sharing the Wealth forums, mainly in rural areas but also in St. John’s. “The economic picture of our province is changing rapidly,” says federation vice-president Lana Payne. “Oil development and oil wealth will have, and are having, a huge impact on every corner of our society, not all of it good.”
 
Payne also points out that the federation–sponsored research revealed that Newfoundland and Labrador has done a decent job of distributing the wealth, with the smallest gap between the rich and the rest in Canada. “That means we did a good job of sharing what we had when we didn’t have much,” she says. “The question is, will we do a good job of sharing now that we have plenty?”
 
The solution must include investments in rural regions, Payne says, citing Norway as a pioneering example of redistributing oil wealth for the greater good. But the city is not exempt from the need for a vision and a plan. “St. John’s is doing better, but that doesn’t mean all citizens are doing better,” she says. “In fact, those on low incomes and even those with decent jobs will find things tougher as living costs go up—filling up the minivan, paying the monthly heating bill—and now the rising cost of housing could wipe out any economic gains families have made through better jobs or higher wages, adding to a sense of standing still and even insecurity. It’s about making sure citizens don’t get left behind, because it would be unfortunate if Newfoundland and Labrador was to become a have province only to have increased our numbers of have-not citizens.”
 
Many of those citizens are no longer around to benefit from the boom. There is a lost generation of Newfoundland and Labrador youth who left the province when the economic Dark Ages descended in the early 1990s. Statistics Canada demographic charts show a gaping hole where those early to mid-30-somethings should now be. In 1994 there were more than 5,000 19-year-olds in the province; in 2006 those fresh-faced teens would have been 31, but there were fewer than 3,000 people that age remaining. That’s a drop of 40% in a key cohort: those working to enter their prime earning years while starting and raising families.
 
The province’s three producing oil fields are nearing peak production, their resources finite. Auditor General John Noseworthy recently warned about the vulnerability inherent in the province’s dependence on notoriously volatile oil. The need is for continuity of projects, and continuity of jobs. “We are on the cusp of such development in this province that we have never seen before in our history,” Newfoundland and Labrador Natural Resources Minister Kathy Dunderdale told the legislature in mid-March. “We have a number of potential projects lined up here. Any one of those projects will fill up just about every bit of capacity we have in this province.” Those include Hebron, ambitious private sector plans to construct a multibillion-dollar refinery in Placentia Bay, and the ever-elusive dream of Labrador’s Lower Churchill hydroelectric project.
 
Carl Sheppard of Strategic Concepts Inc. has been consulting for the local oil patch for more than a decade. He has seen firsthand the benefits of technology transfers and increased know-how for the local economy. “Instead of just importing everything, now there are actually warehouses and a base in Newfoundland that supply the goods and services,” he says. “The actual product itself may have still been manufactured in Toronto or the U.S., but Newfoundland firms are supplying more and more content. The skills and knowledge are here in Newfoundland.”
 
Sheppard’s economic analyses show that local content numbers are increasing. And while the percentages may still seem small, the shift is important. In the current tight labour market—with ample well-paid jobs just a commuter flight to Alberta away—local workers want continuity and competitive wages. That, says Sheppard, “is the only way to entice all the Newfoundlanders back to the province.”
And that is the ultimate goal for this harsh and beautiful place, which has suffered for too long. Now the hope is that the oft-heard promises will ring true, and the have-not label will, finally, be no longer.
 

 

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