Ottawa City Council approved the Orleans Community Improvement Plan (CIP) in 2013. The main goal of this initiative is to attract major knowledge-based employers which would result in a significant improvement in the job-to-household ratio in Orleans so that residents have an opportunity to live and work in the same community. This has been a long-standing issue in the eastern suburb which has experienced limited employment growth compared to the rest of the City or other suburbs like Kanata. The issue is frequently raised in virtually every recent election held in the community – federal, provincial or municipal.
Community Improvement Plans are widely used by Ontario municipalities as a planning tool to encourage the redevelopment or revitalization of designated neighbourhoods and commercial zones in support of specific community or public objectives. Under Section 28 of the Ontario Planning Act, a municipality may offer grants or loans as well as tax relief and tax increment financing options to private property owners to encourage redevelopment. As City staff note in their CIP reports to Council, “Community Improvement Plans are a strategy to improve the economic viability of areas, and can improve the quality of place through urban renewal.”
In the case of the Orleans CIP, eligible projects involve the redevelopment of properties that will result in a minimum of 15 new knowledge-based jobs within 10 years following project completion. The Plan offers “Tax Incentive Equivalent Grants” based on the increase in the property’s incremental contribution to the municipality’s property taxes resulting from the project. The City reimburses 75% of the increment in the municipal property tax annually over the 10 year period.
An important aspect of the Plan deals with the definition of “eligible knowledge-based jobs”. According to the Plan, eligible jobs are defined as “full-time paid positions of regular employment that are physically located within the subject property and are positions only in knowledge-based sectors such as Life Sciences, Clean Technologies, Film/TV, Defence/Aerospace etc…. these jobs must be as a result of new companies or expansion and not relocations from other areas in the City.” The emphasis is clearly on supporting the growth of emerging high growth advanced technology industries but not at the expense of other Ottawa communities.
The Orleans CIP is different from the 3 other CIP programs approved by Council in that it covers the entire suburban community whereas the other 3 Plans focus on commercial districts or strips or Business Improvement Areas (BIAs) – St. Joseph Boulevard CIP approved in 2009, also in Orleans; Carling Avenue CIP approved in 2013, and; Bells Corners CIP approved in 2013. This difference is noteworthy because Community Improvement Plans are generally used as planning tools to encourage the revitalization or renewal of areas experiencing economic decline and/or physical deterioration. Although it falls within the enabling legislation, the City has in effect designated the entire community of Orleans as an area requiring renewal.
The following table summarizes the projects which have been approved to date in the Orleans CIP. The list of projects was obtained by undertaking a search of City Council minutes from the City’s website. It is unknown if any of the grants have actually been paid out or if any projects were missed.
The list provides only a few examples of approved projects but they still nevertheless illustrate some important policy issues. First, there is the question as to whether or not these approved projects do in fact meet the eligibility requirement of providing a minimum of 15 full-time knowledge-based jobs. It would be quite a stretch to place a children’s amusement centre / daycare in the category of knowledge or technology industries even though its parking is full on weekends. The project at 3735 St Joseph Blvd which is directly across Trim Road from the children’s entertainment centre in the Taylor Creek Business Park is a retail mall currently under construction. The project is supposed to create 115 new knowledge jobs but the sign in front of the construction site shows that the new known tenants include a dentist office, Starbucks and KFC.
In the case of 373 Vantage Drive near the intersection of 10th Line and Innes Rd., the construction of the new 3-storey office addition has not yet started. The existing building is a dental centre and there is a leasing sign on the property. The 60 new “high paying, high quality” knowledge jobs will be achieved, according to the original application, by a focused marketing effort to attract cybersecurity firms, medical professionals, legal firms, accounting firms, mortgage brokers, government offices, biomedical firms, clean technology firms etc. – the list does not leave out many other knowledge jobs.
The above examples raise other related questions which I don’t get into here. How does the City actually verify that the eligibility criteria of 15 knowledge-based jobs are met following project completion when the future tenants are only speculation at the time the grant is approved and when does the grant money actually begin to be paid out?
Second, the majority if not all the jobs that are generated from these projects are population serving businesses, many being part-time jobs – that is, retail and professional services that are established to meet growing local consumer needs. While such jobs do offer limited opportunities to live and work in the same community, they would have likely have been created without the City’s financial subsidies in Orleans because of new residential subdivisions and the growth in population. These jobs would also have minimal impact on reducing the flow of commuters to jobs outside Orleans. There is another pending CIP application for 4405-4409 Innes Rd involving the construction of a proposed 473 sq. m commercial strip mall which will likely have a similar tenant mix.
The two CIP projects on Trim Road are likely more the result of the major new residential subdivisions that have been recently completed at the eastern end of Orleans such as Cardinal Creek and Springridge and not the availability of property tax grants. Trim Road, which also has a recent major re-design and upgrades from a one-lane to a two-lane road is now the main link between the new residential developments and Highway 174. The 3/4 km section of Trim Road between the highway and St. Joseph Blvd/Old Montreal Road has experienced a number of new developments as a result besides the children’s entertainment/day care and the new retail plaza including the Heritage Funeral Complex and Taylor Creek Volkswagen as well as a refurbished gas station. The Kids Kingdom Daycare and Play Centre also operates a similar facility in Kanata and most likely identified a similar market opportunity in Orleans as well which attract the business to its current accessible location. There are also two other daycare facilities within 500 metres of Kids Kingdom.
Third and related to the above points, although there seems to be an emphasis on encouraging “high quality” technology type jobs, the use of “knowledge-based” employment is problematic. Part of the difficulty is that virtually every job that exists is dependent on some level of knowledge whether it be a dentist or a Starbucks coffee server working in the new Trim Road retail plaza. The implementing by-law for the Orleans CIP (By-law #2013-293) lists examples of eligible “high quality” knowledge-based jobs. The list includes clearly identifiable technology sectors such as communications and information, life sciences and computer technology. The By-law even goes further in trying to define “high quality knowledge-based” jobs by referring to Industry Canada’s definition of knowledge-based industries .
However, the By-law also lists the more general open-ended categories that are not found in Industry Canada’s categories, like finance, insurance and real estate services (but not involved in retail) and, community, social and personal services including health and education services. It is the latter two sectors which incorporate the population serving businesses. As a result, as long as a development includes businesses that employ at least 15 dentists, accountants etc., it would be able to apply for a tax grant. The Kids Kingdom play and daycare centre would fall under the community, social and personal services category.
Fourth, another underlying rationale behind all the grant approvals, in all CIPs and not just Orleans, is that the projects will generate economic benefits in terms of increased property taxes being added to the City’s annual general revenues. This rationale assumes that the project would not have happened without the grant subsidy. Such an assumption is dubious in at least for the 3 projects approved in the Orleans CIP. Since the new developments are a product of a growing population and the resultant demand for additional consumer goods and services, they would have likely happened anyway – if not at the designated location, then somewhere else in Orleans. In other words, the CIP program does not result in incremental economic growth in the community, it merely shifts around.
Although it falls within the St. Joseph Blvd. CIP, there is a good specific example of where the development proposal would have probably happened without the approved grant money. A $460,000 CIP grant to Place D’Orleans Holdings on behalf of the owner, Primaris REIT, was approved by Council in December 2012 (development projects in the St. Joseph Blvd. CIP do not have to satisfy any jobs criteria). The project involved a one-storey retail building to be built for Farm Boy, a locally based retail store specializing in farm fresh produce. The City approved the site plan for the new store in November 2011 and the construction was completed in August 2012. Farm Boy was previously located in the nearby Centrum Plaza where it closed its store in December 2007. Negotiations between Farm Boy and the Shopping Centre occurred over a two-year period before January 2012 according to an article published at Ottawa Community News, well before the CIP grant approval. It is highly likely then that Farm Boy would have relocated to its new location even without the CIP grant (I would venture to guess also that Farm Boy was not even aware that Place d’Orleans was or would be applying for a grant).
Fifth, the dollar amount of development incentive grants for all CIP applications is based on the expected increase in property taxes over a 10-year period. The annual amount is calculated by multiplying the development incentive, which in the case of the Orleans CIP is a 75% reduction, against the tax increment or the difference between the projected property tax increase resulting from the new development and the current property tax (before redevelopment). This method is often referred to as a type of “tax increment financing”. The rationale here again is similar to the previous one – that the City will still experience a net gain in its annual revenue base (25% of the incremental tax increase over the first 10 years and 100% thereafter) which would not have occurred without the grant.
There are at least two problems with this rationale. One, any new development that takes place in a CIP district will still impose new costs on the City in terms of additional demands for services such as fire protection, police protection, road maintenance etc. which means other taxpayers will have to pick up the slack in revenue or accept a lower level of services.
Two, as I argued above, the new developments would have likely taken place without the grants. The only real net effect of the grant is the loss of the 75% tax revenues during the first 10 years to the City. The flipside is that the same amount becomes a windfall for the property owner. In the case of the Orleans CIP, it turns out to be a no-win situation even if the project happened elsewhere because the entire community is designated under the program.
In conclusion, the City should scrap the Orleans CIP program in its entirety and come up with a more effective strategy that supports economic growth and diversity in Orleans. Achieving a better jobs/population balance in Orleans and reducing the need to commute to the downtown core and elsewhere will not happen by subsidizing the development of dental offices, daycare centres, fast food outlets, accountants and other population or community-oriented goods and services. Sure there will always be Orleans residents driving to downtown Ottawa for higher order specialized medical and other professional services just as the same requirement that exists for suburbanites in Kanata and Barrhaven. The real priority of encouraging a more economically balanced Orleans should be “real” knowledge-intensive businesses in technology including entrepreneurs who already reside in the community and on federal government departments.