A southern Ontario mayor wants to be able to lure businesses to the province by using U.S.-style incentives.
Leamington Mayor John Paterson started lobbying Minister of Municipal Affairs and Housing, Linda Jeffrey, last month to make changes to section 106 of the Municipal Act.
According to the act, “a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses.”
A municipality shall not grant assistance by:
- Giving or lending any property of the municipality, including money.
- Guaranteeing borrowing.
- Leasing or selling any property of the municipality at below fair market value.
- Giving a total or partial exemption from any levy, charge or fee.
Paterson’s town was dealt a massive blow last fall when Heinz, which employs 740 full-time employees, announced it would close its Leamington processing plant in June of this year.
“I’ve asked the minister to talk to the government about making changes to [the Municipal Act] to allow some flexibility to local council to develop tools to attract business to communities,” Paterson told CBC News.
Paterson said the U.S. is using high-priced incentive packages to lure industries out of Ontario and into American cities.
“They have been offered, in many instances, free land, no taxes for 10 years or, in the States, they waive the school tax for a period of time or [offer] free buildings,” Paterson said.
Millions in U.S. incentives
According to the Wall Street Journal, when Caterpillar closed its plant in London, Ont., and announced in it would build locomotives at a factory in Muncie, Ind., U.S. government officials offered $28 million US in tax breaks, training grants and incentives.
Meanwhile, local, state and federal governments offered German automaker Volkswagen $577 million US in incentives, according to the Chattanooga Times Free Press Local. The paper reported that was a record incentive package for a car company project.
In 2012, General Motors announced it would move its Camaro assembly from Oshawa, Ont., to Lansing, Mich.
GM now plans to build a $162- million US stamping plant in Lansing. According to the Detroit Free Press, the City of Lansing is willing to offer a 14-year tax break on real property, which will cover 50% of taxes on the building.
“We’re at a complete disadvantage,” Paterson said. “It’s not just Leamington, it’s every municipality in Ontario.
“You’ve got to give us some tools to work with.”
Paterson said incentives would not have saved Heinz but that they could help land new investment to replace the town’s biggest employer.
“I don’t think we should offer incentives to keep companies,” Paterson said. “But to attract them, I think it’s a great tool.”
However, Mike Moffatt, a professor at Western University's Ivey School of Business, said Paterson's plan could backfire.
"You get local cities competing with each other. So now you get Leamington competing against Windsor for the same factory to come in. That's one of the problems with the U.S. model," said Moffatt.
He also wondered how municipalities would pay for incentives.
Moffatt says having the province involved adds a layer of oversight that might be lost if municipalities were give more freedom.
Heinz originally lured by free water, building
Leamington’s founding fathers actually used incentives to bring Heinz to Leamington. The town, more than 100 years ago, offered a free building, free water for 20 years and didn’t charge the ketchup maker any taxes for 20 years.
Paterson now claims there are at least three regional businesses “being courted on a weekly basis” by U.S. cities. He wants municipalities to be able to assist businesses in the “first five years, by waiving property tax.”
“But we’d have to attach strings to that,” Paterson said.
He said businesses would have to promise to operate for a certain amount of time and guarantee employment for a certain number of employees.
“There’s not a lot the municipal level has as a lever to keep businesses in town,” CBC Windsor municipal affairs expert Cheryl Collier said.
She praised the national newspaper ad campaign Windsor Mayor Francis started in the National Post and Globe and Mail two weeks ago.
Francis is trying to encourage the Ontario and federal government to invest in Chrysler, which walked away from government money last week.
Collier said Francis showed that Windsor was "going to do something, and not sit back idly."
Collier said municipalities can’t allow special tax deals to one particular business; it has to be the same rate for all businesses.
Collier said that “at some level it is frustrating to watch” the province and Ottawa work with companies and municipalities “not have the tools” to do anything.
“But it’s not lost on them, how important this is to the area,” Collier said of the provincial and federal governments.