HomeMy WebLinkAboutCAO-06-023 - The Economic Development Investment Fund: A 2-Year Review.!
Econoir~ic Develo~mei~t
Report To: Council
Date of Meeting: April 3, 2006
Submitted By: Rod Regier, Executive Director, Economic Development
Prepared By: Rod Regier, Executive Director, Economic Development
Hans Gross, Director of Project Administration & Economic
Investment, Economic Development
Michael May, Senior Public Affairs Officer
Ward(s) Involved: All
Date of Report: March 28, 2006
Report No.: CAO-06-023
Subject: The Economic Development Investment Fund: A 2-Year
Review
RECOMMENDATION:
That this report be accepted as information reporting on the current status of the
Economic Development Investment Fund.
BACKGROUND:
On March 6, 2006, Finance and Corporate Services Committee requested an update on
the current status of the Economic Development Investment Fund (EDIF). Its request
came in the context of discussions regarding the Region of Waterloo's process for
planning the development of the Eastside Employment Lands in Woolwich Township,
the ongoing process around the development of Centre Block, and the rapid
development of the Kitchener University of Waterloo Health Sciences Campus.
REPORT:
Background
In 2003-04, the City of Kitchener was facing a growing demand for services, a relatively
slow rate of assessment growth and a decline in the availability of employment lands to
offset the dependence on residential assessment. The City was also facing ashort-fall
on its capital budget to accommodate new capital projects to respond to the growth in
demand for public services and economic development. In late 2003, in the face of a
declining supply of municipal employment lands, three economic investment options
were developed: i) Airport Employment Lands Development, ii) West Side Employment
Lands Development, and iii) Downtown Redevelopment.
In early 2004, the City developed two business cases that examined the merit of the
Downtown and Westside Employment Lands strategies. These were then presented to
the public for review and input through an extensive public consultation. This process
involved a series of educational and interactive public meetings that culminated in a
citizen's forum. At this Forum, a Community Capital Investment Ranking Team
consisting of members of the community, ranked the investment options available to the
City outside of its traditional capital program. The Team reached agreement on the
creation of a $110 million fund, to be supported by a special 10 year tax levy.
The development of the West Side Employment lands option was rejected on the
grounds that the project was not economically viable -the cost of development was
projected to be approximately $400,000 per acre at a time when the price of industrial
land was averaging $80,000 to $100,000 per acre. The Airport Lands option was
largely being led by the Region and Woolwich Township and did not appear to require
City investment.
The process resulted in a Shared Community Vision for the fund. That vision was of "A
balanced economic development strategy which includes investment in employment
lands to support our manufacturing sector and investment in the downtown to support
the development of a new education and knowledge creation cluster." In response, the
City crafted an Urban Investment Strategy to position its economy to compete by using
new university campuses as catalysts to attract the talent and corporate investment
needed to succeed in the knowledge economy. This strategy has been subsequently
validated by recent cluster research sponsored by the Prosperity Council. The City's
strategy also anticipated ashort-term employment land solution in the Grand River
West Business Park and, potentially, the Breslau North lands which would need to be
serviced through the City of Kitchener.
Financial Performance
The Economic Development Investment Fund has exceeded initial expectations from
both a financial performance and a levy impact perspective. For the purposes of
developing the EDIF model, certain assumptions were made related to the timing of
cash flows, expected interest rates on long-term debentures, and the impact of
assessment growth on future capital levies. Although the timing of the introduction of
the EDIF concept was related to low interest rates for debt financing, long-term interest
rates have been even lower than anticipated, resulting in lower borrowing costs to date.
These low borrowing costs combined with healthy assessment growth have reduced the
capital levy impact for citizens and ratepayers. In addition, the EDIF projection
forecasts a positive cash balance at all times, which results in interest income instead of
costs associated with temporary borrowing.
Approximately 54% of the original EDIF budget has been committed to projects
approved by Council. These investments will be made over the next 3 years.
Conversely, 46% of the EDIF budget has not been committed by Council resolution at
this point in time. The following list summarizes the current commitments to the EDIF
budget.
A Summary of Current EDIF Commitments and Notional Allocations
EDIF expenditures approved by Council total $59.41 million, consist of:
o Wilfrid Laurier School of Social Work $ 6.50 M
o Downtown Community Centre $ 1.70 M
o Downtown Streetscape Improvements $ 3.30 M
o Victoria Master Plan $ 2.70 M
o Centre Block Land Purchase $ 9.70 M
o Grand River West Business Park $ 1.32 M
o Downtown Residential Intensification $ 1.00 M
o Parking Solutions (Sammy's Garage, Centre Block) $ .39 M
o Centre Block Redevelopment $ 2.00 M
o The Block that Rocks $ .66 M
o Studies $ .14 M
o University of Waterloo School of Pharmacy 30.00 M
Total $ 59.41 M
• EDIF funds allocated, but not approved by Council, consist of:
o Employment Land Development $ 10.68 M
o Central Library Project $ 32.50 M
o Parking Solutions 5.11 M
Total $ 48.29 M
• Unallocated $ 2.30 M
EDIF Total $110.00 M
EDIF was originally developed as a long-term investment program. As a result, it is
premature to evaluate the total impact of the overall program. However, it is possible to
say that the economic climate has improved dramatically since the establishment of
EDIF. Business activity both in the downtown and in the Grand River West Business
Park have both increased as a result of the strategic investments made through EDIF.
Land sales in the Grand River West Business Park are ahead of schedule. In the
Downtown, 2006 business enquiries are up 100% over 2005, loft condominium projects
are moving forward ahead of schedule, to some extent as a result of EDIF investments.
CONCLUSION:
Kitchener's Economic Development Investment Fund is contributing to positive change
in the City's economy -both Downtown and in the suburban industrial parks. The
cluster strategy which formed the basis of the investment in the Schools of Pharmacy
and Social Work in the downtown has been validated by recent Prosperity Council
sponsored research. Ongoing work in the Arts and Culture Cluster Strategies and the
Pharmaceutical/Biotech Cluster Strategies remains a priority for City staff and advisory
groups.
Nevertheless, the City must be prepared to review and re-evaluate priorities in ever-
changing economic circumstances. For example, in the downtown, the pace of
investment by Downtown employers has saturated the available parking supply more
rapidly than anticipated by the recent Parking Study. This challenges the City to
expedite parking solutions and travel demand management initiatives envisaged by the
Study.
In addition, as recent announcements by large manufacturers such as Michelin indicate,
Kitchener's mature industries -automotive-related manufacturing in particular -are
under intense competitive pressure. The City, in partnership with economic
stakeholders, should consider developing a cluster strategy to support manufacturing
competitiveness. In particular there is a need for the City to refine its strategy for
employment lands given the continued decline in available greenfield employment lands
and the relatively slow pace of progress in developing viable solutions on the Eastside
or Airport Lands. Consideration should also be given to City involvement in the
development of strategic greenfield employment lands on a case by case basis as
opportunities arise.
In summary, EDIF, in the second year of a 10 year program, has already proven to be
powerful and effective economic development tool for the City of Kitchener -one that
gives the city the ability to respond to changing economic circumstances and stimulate
new economic activity through strategic investments in catalyst projects.
Hoa Hegier Hans Uross
Executive Director Director Project Administration &
Economic Investment
Michael May
Senior Public Affairs Officer