Here’s an issue that has kind of sneaked up on us, but when it gets aired fully later this year it may well be one of the most significant discussions of this council’s four-year term.
Last Friday, near the end of another long day of budget deliberations by the strategic priorities and policy committee — a.k.a. committee of the whole — Joni Baechler raised the question whether residential taxpayers should be subsidizing industrial newcomers, commercial enterprises or developers building residential downtown.
At the moment they are. And we’re not talking small change either.
The subsidies, in the form of forgiven development charges, so-called community improvement programs and industrial land upgrades, amount to more than $48 million over the past decade and are expected to cost a further $26 million in the next 10 years. That’s according to figures from Martin Hayward, the city treasurer.
Ms. Baechler, the councillor for Ward 5 in north London, believes it’s time her colleagues examined the necessity of these subsidies.
Mayor Joe Fontana, which whom Ms. Baechler has often clashed over the past two years on economic policy, calls the debate “dangerous.”
The subsidies have long existed. They were granted at a time when London was desperate for incentives to attract new industry, was worried about the decline of retail downtown and wanted to entice more housing into the core.
But times have changed. Today London has the second lowest industrial tax rate in Ontario, and the lowest commercial rate. As well, more than 5,000 people now call the downtown home.
Development charges — which currently add about $19,000 to the price of a new home and much, much more to the cost of a new manufacturing plant — are imposed to help defray the expense of providing services to expanding areas of the city. The connection with industry is obvious — new plants mean new jobs which usually translate into new residents in new homes.
No development charges also make downtown residential more competitive. And the community improvement programs have allowed downtown retailers tax holidays or grants to spruce up their store fronts.
Councillor Baechler is not arguing we should cut the subsidies completely, at least not yet. A motion she presented last week during the budget debate would see one-quarter of the current development charge applied to new industrial and downtown residential construction this year.
She sees this as a new source of revenue for the city — and a time when residential taxpayers are crying they are tapped out — with only limited impact on our economic development prospects.
Mayor Fontana, who apparently has yet to meet a business incentive he didn’t like, is four-square against ending this one.
“I don’t mind having this discussion,” he says. “We should always look at revenue. But we’re talking about 25 percent on industrial development and that is dangerous. It could give an edge to our competition.”
For now, council by an 11-3 vote — with the mayor and councillors Dale Henderson and Paul Van Meerbergen opposed — has asked the administration for a full study of the possibilities and ramifications of changes to the development charges holiday.
The report is expected in a couple of months and should generate a useful debate over the patchwork of economic development programs the city now has in play.
Philip McLeod is a longtime London journalist who writes a regular blog on civic affairs. He can be reached at email@example.com.