Competition for foreign direct Investment is fierce. Most recently, Thunder Bay lost an Australian manufacturer to Houston, Texas. The Community Economic Development Commission spent approximately three years working with this group.
This isn’t the first or last time
Thunder Bay will lose manufacturers to other economic development
jurisdictions.
I had dinner with the company’s CEO and plant manager when they first landed in Thunder Bay. They loved what they saw. They related to our wilderness and the outdoor opportunities. They liked the Canadian system and our way of life, as it was similar to theirs in Australia. They found many commonalities that would have made transition easy; real-estate costs were reasonable, distance to market was not an issue, and they could set up shop pretty much anywhere.
You would think there was a good match. So why did they go, what were they offered? Municipalities in Texas have the authority to abate local valorem taxes on real and personal property for up to 10 years and other goodies.
As an economic development professional and local business owner operating in both domestic and foreign markets, I have seen how business is done at home and elsewhere.
Over this period I have also seen my colleagues challenged and frustrated when it came to attracting foreign investment to Northern Ontario.
Unless the investor is tied to a
specific endowment or resource found in the region or tied to a
unique local market condition, many who have
explored Northern
Ontario have opted to locate elsewhere.
Looking at the marketing materials that economic development entities produce, in many cases you will be impressed.
Most meet the province’s investment readiness test criteria. The marketing information showcases the best of our communities, what we enjoy and why we value living in these communities.
So why aren’t there more inquiries? Most economic development officers do pretty much what it takes to keep the foreign investor’s interest. “We hook them, but can’t land them.”
I bring this up not to criticize but to stimulate thought, create awareness and identify problems with the hope of finding solutions.
Municipalities create and fund economic development entities, which in general terms have mandates that encompass sustainable growth, economic diversification, economic revitalization, job creation, business expansion and retention, and investment attraction.
In doing so, they send out their people to do their job but soon find themselves noncompetitive. One reason for this is that their “tool box” is incomplete. Other jurisdictions outside of Ontario have different development packages or incentives than what we offer and in many cases the government agencies involved in these projects tend to be pro-development and less constricted.
Depending upon which side of the fence
you sit with regards to the usefulness or uselessness of economic
development incentives, and whether they should or shouldn’t be
given, the fact is that most other jurisdictions have and use them
effectively.
Economic development incentives are pricing tools employed to lure new jobs and investments by reducing projects costs while also managing risk.
In the end it goes back to basics: return on investment and how well one manages the entire incentive process.
How do we develop a Northern Ontario development package that enables us to compete with those in Texas, New York State and elsewhere?
Incentives are either “As-of-Right” or “Discretionary”.
As-of-Right means that the incentive comes as a pre-established program with the type and amount of the incentive objectively defined, like those provided by the Northern Ontario Heritage Fund or FedNor. Discretionary incentives require a case-by-case analysis, customized for a particular jurisdiction, city or project, with the approval of a designated agency.
Discretionary incentives are based on the perceived value of the project to the public sector and community as demonstrated by the number of jobs created and/or maintained, salary levels, direct and indirect tax revenue. Subjective factors are also considered, such as the strategic value of the investment. Discretionary incentives are made available if the project wouldn’t have proceeded without the incentive. Municipalities in Ontario don’t have the luxury to develop discretionary incentives, thus compete on an unlevelled playing field.
As economic development activity influences a community’s demographics and if our communities are to grow and diversify, they need the flexibility and ability to develop discretionary incentives.
Development policies are made to attain desired results. This was evident when Ontario imposed a 60 per cent domestic content requirement on the feed-in tariff program for solar energy projects.
This policy enabled the creation of 200 jobs around Kitchener-Waterloo. So, if there is a will, there is a way. As provinces have the ability to influence job creation, the municipalities should have the ability to influence job distribution.
If “attracting outside investment” is to continue being part of our economic development entities’ mandates, they need to be competitive. They need to have a “full tool box” with better tools. They need to be allowed to develop and use discretionary incentives.
