Downtown Investment an Election Issue?

March 9, 2014

Both local papers have recently featured headlines posititioning downtown investment as a potential election issue.

Guelph Tribune article

Guelph Mercury article

Is it really an “election battle zone”?   I think perhaps it is being positioned as such by the media because mayoral candidates Karen Farbridge and Cam Guthrie voted differently from each other on whether to move forward on the idea of an Economic Investment Fund (EIF) to support major capital investments on key strategic projects.  Whenever you have two election candidates at the opposite end of an issue, it becomes part of the election debate.

But let’s look deeper at the issue itself.   An Economic Investment Fund idea is nothing new to Guelph, nor is the concept of a temporary special levy.  In fact, a special tax levy was once the norm.  Historically, rather than build reserves or debenture major capital projects, past councils historically implemented a special levy for most things, even sidewalks and park equipment.  Sometimes, special levies were only taxed to households who benefited from the improvement (like sidewalks or streetlights) and city-wide projects (such as building Waterworks or hospital capital campaign) were assessed to all ratepayers.

Today, it is recognized that all residents benefit from infrastructure renewal and economic development initiatives.   Taxes collected are used for the common good, not an a la carte approach.  Many services are supplemented by user fees (ie. transit, recreation programs, etc.).  Capital and infrastructure funding also comes from development charges (DCs), grants for other levels of government, reserves, and debentures.  Debt financing is used when successive generations derive benefit from the project, so that the burden of cost is not borne only by current residents.

So what about the Economic Investment Fund special levy?  Here are some of my thoughts….

First of all, it’s not about downtown.  There will be temptation to position the EIF as a downtown vs. suburban issue, and use it to create a wedge between different geographical areas of Guelph.   This is unfortunate, because the EIF is intended to create revenue to further invest in facilities throughout the entire city — such as the South End (Clair Road) Community Centre, invest in the redevelopment of IMICO lands and the Guelph Innovation District (former Guelph Reformatory) in the East End of Guelph.

Second, the EIF is all about timing.   It is essential that the City is in a position be at the table and ready to ‘put skin in the game’ when the timing is right.  Private investment in our city is gaining momentum right now.  The current focus on downtown has a strong business case for several reasons:  the return-on-investment is much higher, Places to Grow requires us to intensify our urban centre, and finally, market demand for downtown is hot.  Boomers are downsizing, residents want to reduce their carbon footprint, the innovation economy is looking to set up shop downtown, and arts and culture downtown are thriving.  Ten years ago, Waterloo was at the same crossroads, and are now seeing the returns on their decision to create a special levy and EIF to springboard investment in downtown Waterloo.

Third, the EIF will lower household tax increases in the future.  Yes, I wrote lower.  We all know growth does not pay for itself (it is not allowed to under current provincial DC legislation).  So if we ever want to be able to reduce the impact of growth, it can only be done in two ways:  a) increase revenue and/or b) reduce expenses.   Revenue comes from assessment.   It is the increased assessment that will be generated from the Baker Street development (and adjacent spin-offs) that will help to keep tax rate increases to a minimum in future years.   In other words, the old saying “you have to spend money to make money” applies here.

Fourth, and finally, the EIF is about having a say in our own destiny as a city.   Our capital budget financing over the past many years has been affected by decisions that are outside of the Council’s control.  For example, the construction of a new Public Health facility and a new Police Headquarters are not Council decisions.  I am not saying these are not needed facilities in our community, but only that they impact our ability to finance other strategic economic development projects, such as a new library and community centres.  The EIF means that we can choose — strategically and with a sound business case — where and when to invest in building our community.

What do you think?  I would love to hear your perspective on this issue….

LP