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Compensation for coinage changes?
Brian Martell
The following contribution comes from Brian Martell, a Canadian businessman. Martell is the Vice-President, Canadian Sales, for the Heritage Coffee Company, Ltd. headquartered in London, Ontario. This article was originally published in 2000 on his firm's website, under the title "Expropriation Without Compensation". It has been reproduced here with the permission of the author.

Martell's company is a player in the vending machine business. Martell has written a number of other articles published on the Heritage Coffee website and various trade journals. Not surprisingly, most of them are about the coffee business. However, one day in June 2000, obviously upset by the cost of altering vending machines to accommodate a Canadian government plan to alter the metal content of Canadian coins, Martell strayed into the field of expropriation law when he wrote this article. It presents an argument for compensation to vending machine operators.

Imagine sitting in your office, being suddenly distracted by the rumble of bulldozers lining up in your parking lot. At your office door a government worker tells you that, in order to save three quarters of a billion dollars, your business property will be part of a new super highway. You applaud the government for saving all that money for the taxpayers (as you are one), but note that this will cause a great cost to you and your neighbours who are in the direct line of the proposed highway.

"Sorry sir, you knew of the government's plans for the highway for over a year. It will make travel in your area safer and you have to keep up with new technology as a normal evolution in your industry. Further, don't count on getting any government handouts for taking your land."

You point out that no other business outside of the path of the government highway will be affected and that the cost of relocation will be borne solely by those who fall into the construction zone. You also mention that knowing in advance of the government's plans does not mean you can avoid paying for the cost of relocation, regardless of how much notice is given. Alas, your logic is drowned out by the sounds of small businesses being plowed under by a government juggernaut.

Does this scenario sound like Canada, or perhaps North Korea? Sadly, this tale involves the Office of the Minister responsible for the Royal Canadian Mint, the Honourable Alfonso Gagliano. Five years ago, the government took on the task of changing the metal content of coinage to reduce costs at the Mint. Changes to date have involved the penny, one and two dollar denominations and now, in June 2000, nickels, dimes, quarters and fifty-cent pieces. These changes will, to Ottawa's credit, save Canadian taxpayers approximately $784 million dollars over the course of a coin's 20-year useful life.

What it also does is force every vending company in Canada to re-direct funds into new software or hardware to accept the new coins. The vast majority of these companies are small businesses that will be going further into their credit lines to finance these mandatory changes.

The Canadian Automatic Merchandising Association (CAMA), presented its case for just compensation to the Canadian government. It noted that the changes proposed by the mint will force all vending operators to change their coin accepting devices or leave the industry.

Further, CAMA noted that all other industries which sell the same products as vending machines will incur no cost whatsoever. In a letter dated February 11, 2000, Mr. Gagliano stated that these additional costs are " a normal evolution in your industry" - in other words - you are on your own.

You may answer that this is expropriation without compensation. Quite simply, the government has a legal monopoly on the production of coinage and therefore controls the electronic signature of each and every coin (it is this signature which is used to validate coins). While no one would dispute the logic in saving hundreds of millions of dollars, the government, in so doing, is expropriating the standard used by the vending industry.

The industry recognizes that the government was not out for vending blood when it made this decision. It made good fiscal sense to go ahead with this program, as it might for the government to go ahead with a new road through your living room. In both instances, all rational Canadians would agree that just compensation should be in order for the affected parties, especially when the compensation is a small fraction of the economic benefit derived through the project. Indeed, back in 1968 the then ruling Liberals did see the issue as a cause for just compensation when the Mint changed the quarter from silver to a nickel alloy. Unfortunately, the now ruling Liberals do not see this as the case.

One could be cynical and think it might have something to do with the recently failed NHL package, or perhaps the fact that the 26,000 Canadians who derive their livelihood directly through the vending industry don't even make up one riding. I would like to think, however, that it has more to do with misguided perception.

Therefore, I invite Mr. Gagliano, and all other members of parliament, regardless of their party stripes, to rethink this issue and do the right thing. In the end, compensation for a derivative of fiscal responsibility is the hallmark of a principled government.

© 2000 Brian Martell

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