401/402 development! We need land, hurry, hurry.
I heard that song over 10 years ago when I was on city council. There was an “urgent” need for an industrial land strategy. So, without much concern for the costs (after all, don’t you know we would be rolling in new assessment and taxes would not go up) the city embarked on spending tens of millions of your tax dollars buying land along the 401 and putting in the roads, water and sewers needed to sell fully serviced land. Only a city would make that kind of business decision (when someone tells you that government should run like a business you can be sure they are not someone in the land development industry – they like the bad business decisions)!
At times, the land was sold for less than what it cost. But, you say, was it good for tax revenue? Here are the numbers, taken from the January 19th meeting of Council’s Finance and Administration Committee .
Data on assessment growth
It has added to the city’s tax base, but certainly not in large amount. So, now we need to do this again because “we have fallen behind.” This is nonsense. According to the assessment growth data presented by staff, the growth in assessment has been not as bad as some have made it out to be. But some never let facts get in the way.
How much new revenue would a new manufacturing plant bring?
The city takes in about $451 M in property tax revenue. How much of this do you think is from industrial? A mere $15.5 M it total. Of that, the largest industrial firms, like General Dynamics, etc. pay only $6.2 million. The lion’s share of tax revenue is residential, $340.0 million ($39.5 M of that from multi residential). Second prize goes to commercial, everything from Masonville and White Oaks to strip malls and power centres at $64 M.
So will this new 401/402 strategy pay off?
Hard to say but the costs will exceed the revenues for a number of years. That is because industrial development doesn’t pay that much in taxes and you the taxpayer gets to pick up the tab for buying the land, and then putting in the roads, sewers, storm water ponds, and water infrastructure. And if the city gets $700,000 from a manufacturing business, you need about 6 new factories paying that much to raise the assessment growth enough to shave 1% off your taxes. Reasonable?
London has had substantial growth in housing and in industrial and commercial development over the past ten years. The current economic climate in North America makes it risky to count on buoyant growth in the near future to pay the bills. For example, home builders currently build about 2,000 new residential units each year. The city gains about $4.6 million in new tax revenue from these units, or a 1% difference to your tax bill. To double that to 2%, a total of 4,000 new units per year would have to be built. Reasonable?
What about commercial development?
London would need another 2.5 major malls per year to reduce taxes by 1%. Do any of these scenarios in whole or in combination with one another pass a “reasonableness test”?
Keep in mind that once development starts, the City has on-going costs of providing services such as firefighting and policing, garbage and recycling collection, road and sewer maintenance. These costs start well before a new residential or industrial subdivision is fully built out.
The simple fact is that property tax revenues do not increase fast enough to keep pace with these new costs for some years. This is one reason why services such as libraries, new schools, and transit lag behind the opening of new subdivisions. And the more new, incomplete subdivisions you have, the bigger the operating cost issue. This is one big reason why taxes continue to rise despite a flurry of new subdivisions and the last industrial land strategy Council embarked on.
OK, what about job creation?
Hard to say as there is NO means to ask a company to reveal its actual payroll and to determine if the jobs are held by Londoners.
Waiting for the other shoe to drop – SWAP
One of the only times I saw Mr. Fontana before the election was at a Planning Committee meeting that gave the Committee an update on the Southwest Area Plan .
This is the next growth area of the city. The draft plan calls for more industrial and residential growth, noting only so much can take place before there is a need for a new sewage plant (in the southwest corner of the city with a pipe outlet to the River that is outside the city). The plan is thoughtful and notes that it is affordable to proceed in steps. A number of the speakers, including out of town developers, wanted to accelerate the growth and during the campaign, it was part of the now Mayor’s thinking that a fast path is the best path. This seems to be shared by MPP Chris Bentley who has been also banging the drum for accelerating the build out (do you smell electioneering in the air)? The residents of Lambeth and the rural areas near Dingman Creek spoke at the same meeting, wanting to know how the natural areas and small commercial businesses would survive.
London has been working to diversify its economic base and to encourage innovative and entrepreneurial businesses that are creating the goods, services and jobs of the future. The public sector is also a critical contributor to our local economy. Health care, education, social assistance, public administration and utilities provide about one out of four jobs in London. Our largest employers are in the public sector, and they provide jobs with good incomes and benefits, enabling their employees to pay property taxes and patronize local businesses, as well as serving the community. Our economic future depends on a healthy balance of the public and private sectors. People working in public services are not a drain on the taxpayer, as some appear to assume, but are essential contributors to the quality of life and economic productivity of our community.
Many civic leaders believe that cities need to be “growth machines” in order to thrive, and that cities that don’t grow are losers. Advocates of growth are inclined to promote its benefits while underestimating its costs and negative consequences for affordability and the quality of community life and the environment. Urban scholars Chris Leo and Kathryn Anderson of the University of Winnipeg, in comparative research on growth in Vancouver and Winnipeg, found that a modest growth rate becomes a problem when it is combined with urban sprawl.
The problem is not slow growth but mismanagement of the growth that can result from a commitment to growth at any cost.
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