Fontana to staff: “Seems you want me to find the money!”
That was the mayor’s assessment of the report delivered by the new director of corporate investments and partnerships to the Investment and Economic Prosperity Committee at its meeting this week.
Harvey Filger, newly hired three months ago to fill the job that was created at the request of the mayor and council, the job of kick-starting London’s economy so the mayor can fulfill his promise to create 10,000 jobs over four or five years. That was two years ago, so there’s not much time left.
Filger had prepared a focussed but comprehensive report. Entitled A Paradigm for Economic Prosperity, it pointed out that the prosperity that London had enjoyed as a result of the Auto Pact had been lost with globalization and NAFTA. Southwestern Ontario, dependent on manufacturing, was hit especially hard by the recession of 2008 that followed. “The estimated loss of payroll since 2007 in London is approximately $1 billion,” the report states.
“A successful economic development strategy has to be based on a realistic determination of the assets and liabilities of a community,” the report continues. Taking that into account, it makes a number of recommendations:
- Working with other levels of government to make sure we get our fair share;
- Cutting through red tape to become more business friendly;
- Defining objectives and priorities for projects.
Filger had also reviewed the proposals the committee had received over the summer. Generally, he felt, they fit into four broad categories: strategic land acquisition to attract industry, a clean and vibrant downtown, leveraged funds for targeted projects, a world class transportation system.
None of this comes without investment from the city, of course. So now came the hard part: where to find the money.
The city has limited ability to raise funds. You can always ask the “higher” levels of government but they usually want the municipality to put up some of the “seed” money. So where do you get that?
There are only four ways to raise money, Filger pointed out. You can increase taxes, you can reduce spending by cutting services, you can borrow, you can sell off assets. That’s it. There is no magic bullet, no money tree.
It’s not what the mayor wanted to hear. He appreciated that Filger had "hit the high marks" from his objective position of having only been in London for three months. But surely, somewhere in his job description had been the words: “Find the money.”
“Seems to me you want me to find the money,” Fontana grumbled. “So what are you going to do?”
He didn’t wait for a response. He had an idea of his own. At the Finance and Administration Committee meeting the previous week, the city had managed to borrow money, $70M to be exact, at 2.8% interest. Interest rates were bound to be low for some time to come. He had been discussing it with someone from the Bank of Canada. For sure the return on investment would outstrip the borrowing costs. It wasn’t a bad option to look at, he suggested. It just required a “paradigm shift.”
Indeed it would. City treasurer Martin Hayward pointed out that investment requires upfront money while the returns may be sometime in the future; the carrying costs and repayment of the debt starts right away, however, and has to be factored into the next year's budget.
So how are you going to pay for it until your ship comes in?
The city plans its projects and debt issuance well into the future. It borrows when a capital project is finished at a time when interest rates are favourable. That’s how it has managed to keep its triple A rating. Once your borrowing gets out of whack with your reserves, the interest rates go up. And borrowing as an investment carries a certain amount of risk.
It’s not the first time the Hayward has had to deliver this unwelcome news; it probably won’t be the last.
And you really can’t blame the mayor for giving it another shot. After all, he has staked his reputation on a zero per cent tax increase with no service cuts so he can’t go that route. He had tried to sell off parts of London Hydro, but the community and council had turned on him. Debt financing was all that was left, by Filger’s own account.
Councillor Stephen Full-time Orser had missed the earlier part of the meeting and most, if not all, of the presentation, but a couple of things in the report caught his eye.
This business of red tape; he agreed that efforts should be made to reduce it locally, but what about the other levels of government? How could they be made to do the same? How could provincial and federal regulations be reduced? He was probably thinking about how to get around the Environmental Site Assessment for the McCormick plant so that it could quickly be handed over to one of the three investors who can’t wait to get their bulldozers out there.
Even though the city is in competition with other municipalities, Filger pointed out, they still have those regulations in common which may affect their ability to compete with various US jurisdictions. His best bet would be to work with other municipalities to lobby the respective levels of government.
It’s not advice that is likely to go far with Orser. To the best of my knowledge, despite a generous travel allowance, he doesn’t participate in the Association of Municipalities of Ontario (AMO) or the Federation of Canadian Municipalities (FCM) which offers such collaborative opportunities. Apart from the occasional rendez-vous at the Harmony, he likes to go it on his own.
And what about selling off some assets, some city property that wasn’t very productive, Orser wondered.
“There’s no money tree in the back yard,” Filger informed him. “We could sell the least productive but they will also be least attractive to an investor.”
There were a few other brief comments. Paul VanMeerbergen liked the report. He found it realistic. He just hoped that cutting through red tape wouldn't lead to another layer of bureaucracy and more hiring. Matt Brown found it “brutally honest” and hoped that there would be additional opportunity to engage the public as they went forward. Bud Polhill liked the reference to the 401. “The 401 is where our future is,” he proclaimed.
Visitor Paul Hubert too like the frankness of the report and Filger’s suggestion that it provided the “smelling salts” as an antidote to the “blue-sky thinking" that had been going on. Hubert doubted they would be developing along the 401 anytime soon but a local businessman and philanthropist, Mitch Baran, had made some suggestions for establishing a presence there in the short term. And what about other parts of the city? What about incentives for brownfield redevelopment like McCormicks?
The city had good brownfield incentives already, director of planning and development John Fleming assured him. As for the 401 and industrial land strategy, they were looking at land needs and the possibility of adjusting the urban growth boundary for private investors through the official plan review.
That should keep the landowners in that area happy. But not as happy as they would be if the city were going to buy the land.
Chairman Joe Swan tried to sum up. There was a lot to do. They needed to come up with a source of funding. They had to figure out how much they needed. They needed to identify and work with other wealth generators like Tourism London and the London Economic Development Corporation. And what about those job generating sectors like education and health? There was a lot of work for the next 90 days.
But the sticking point will be where to find the money. And whose job it will be to find it?
Staff has provided the options. Choosing the source, that’s the job of council.
Selling off valuable assets?
That's a political decision.