Why Buy the Cow?

Ron Bolin:  Mar.18, 2011

Last Monday Council directed the Economic Development Commission to “proceed with the establishment of an Economic Development Corporation within the constraints of existing City funding levels and appoint the existing Commission members as the interim board of directors.” The vote passed 7 to 1.  The funding thereby approved was $1,357,000, considerably higher than the $350,000 we started with in 2005.

Next Monday, March 21, Council will deal with a recommendation to hire a consultant to find a leader of the Economic Development Corporation, thus proceeding quickly down a very hastily and ill-defined path of expenditures for which the taxpayers of Nanaimo will be liable.

In speaking with City Hall about this matter, I suggested a truly private mode for its operation whereby primary funding came from those sources mentioned in the Staff Report to Council, i.e. $400,000 raised from a 2% local hotel tax; the $70,000 in memberships referenced; and tying down some of the other sources of contract income noted in the report to Council.  I further suggested a substantial sum similar in proportion to that provided by the hotel tax from other city businesses.  In this case the city could provide some additional initial funding, perhaps over a three year period to assist in the establishment of the Corporation while its success is measured.

I was informed that such a model was discussed with business but was rejected.  On reflection their reasoning is clear:  Why buy the cow when the milk is free?

If taxpayers pay the total freight how can the corporation be arm’s length?  The issue of Economic Development is an important one.  The corporate structure as presented is simply a case of moving around the deck chairs on the Titanic.  The concept is worthy of more discussion but cannot be successful without the tangible buy-in of our local businesses, and that buy-in will not take place without independence from City Hall.

I was informed that the reason that business did not feel that they should make any extraordinary contribution to this venture is that they currently pay nearly 3 times the mil rate charged to residential property.  I would venture that this is an exceedingly short sited view of the situation.  Where is the information which shows the costs of the infrastructure which serves residents relative to those servicing commercial establishments?  My questions in this regard have been met as if the relation of costs to benefits were an idea which had never been considered –and perhaps it hasn’t.

I would propose that one measure of the relative costs of servicing these different elements of a community might be to examine the start and ends of trips made between them.  I would submit, first that the number of trips to and from a residence every day/month/year  is a very small proportion of those made to and from commercial establishments, or those establishments would be out of business and that they are therefore rightly charged at a higher mil rate to cover those increased costs.

Second, as we in Nanaimo are dealing primarily with relatively small commercial operations rather than giant industrial organizations which create their own magnet, the reason businesses operate in Nanaimo is because of the residents.  It is not the case that residents come to Nanaimo because of the businesses located her.

It is unreasonable for the Nanaimo Business Community to expect taxpayers to directly bear the entire burden of Economic Development in the city rather than the relatively small proportion by which we all directly benefit from it.  Most of the income in town is generated by government or quasi government agencies rather than business.  The proportion of total Nanaimo property taxes paid by residents far exceeds those paid by the commercial and industrial sectors combined. There was a day when our large shopping centres and big box stores acted as magnets to attract business from some distance.  As other malls and big box stores came to surrounding communities, our magnets have lost much of their power.

Will the new magnets which the city seeks be created by our City Council or Staff.  I doubt it –and so apparently does business.  Let’s get this thing right before we find ourselves, as so often, in the losers seat again.

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