Tax Incremental Financing comes to Orléans
Where to start with City to subsidize ‘good jobs’ in Orléans? How about some math.
The city is going to spend $20 million over five years to bring 3,000 jobs to Orléans.
The city is going to spend $6,666 in the next five years to create one job in Orléans.
The city is going to spend $1,333 a year for every job it creates in Orléans.
There are so many things wrong with that plan. (One update from the comments: not all of the $20m is dedicated to Orléans).
Where's the concern for today's taxpayers, both residential and commercial?
We cannot pretend that the 3,000 jobs will be 'new' to Ottawa. If macro-economic conditions allow for 3,000 jobs to be created in the Ottawa area they will be created because private employers are seeking profit and growth. This plan will only shift them to Orléans at taxpayer cost. It won't create them from nothing at all, as Councillor Blais readily admits:
Blais said it’s OK if the jobs would have come to Ottawa anyway but would have gone someplace like Kanata, or south Nepean, or downtown. The idea is that if Orléans is a more complete community, it will benefit everyone.
This will not "benefit everyone". It will benefit almost no-one. Almost everyone will incur some cost.
- Nobody outside of Orléans will benefit since they'll take on a share of the forgone $20 million through higher taxes.
- 99% of Orléans residents who keep their current jobs outside of Orléans won't win: they too will take on a share of the $20 million.
- Orléans residents living adjacent to the new developments will pay higher taxes due to higher MPAC assessments, even though they'll keep their current jobs and long commutes.
- Every existing commercial business will lose: higher taxes again to benefit new entrants (who might be competing for the top talent in Ottawa).
Who might win?
The 3,000 lucky employees might, provided they actually live in Orléans. The good people of Orléans are as educated, smart, and resourceful as anywhere else, but it doesn't mean 100% of the jobs will go to local residents. (If a 'local residents' string does get attached we need to have a sober discussion of what true nanny-state policies look like). Let's say 500 of the jobs end up going to residents who live elsewhere. So much for creating 'local' jobs, and those 500 cost Ottawa taxpayers $3.3 million.
If they do live in Orléans they'll win big. Not only do they get to live in lower cost housing (outside the core) they will save money on their commuting costs because the city is paying over $1,300 a year to create their job. Oh, if only the residents of Richmond or Barrhaven could be so lucky.
Who will definitely win?
The private employers who 'create' new jobs in Orléans will win: tax breaks! Of course, they will only win for a few years until the incremental financing ends. Then we'll find out how much this investment was really worth. How many of the new employers will close up and move? Or simply fail? If anyone promises you that won't happen, that person doesn't understand business.
It's better to understand why Orléans has a chronic good-job shortage.
I won't pretend to say I know for sure. But here are some good historical factors:
- Only at amalgamation in 2001 did Orléans become 'whole'.
- Prior to that it was split between the City of Cumberland and the City of Gloucester.
- Cumberland had only been a city for two years. Prior to that it was a township.
- Gloucester had been a city since 1981 - which likely explains the semblence of development around Blair Rd.
By simple accident of history Orléans has always lacked the preconditions for developing as a city, with a dense core acting as employment centre or central business district. The old City of Ottawa developed that way. Kanata was hatched that way. Politicians have been promising good jobs in Orléans forever but arguing against history is like shouting in the wind.
(For the record, I'm not against Orléans getting some good jobs. I just think subsidizing them into existence is terrible finance, economic and land-use planning).
Nonetheless, Orléans exists, and is big today because people moved there for cheap housing. The housing was cheap because it was far away from everything. Residents made an opportunity cost decision to accept long travel distances in order to buy that house. To this day they continue to enjoy lower property taxes for the same reason. The homes are further away, lowering demand, lowering assessments, lowering prices, and ultimately lowering taxes. The downside is: long commute to your job. Opportunity cost is unavoidable.
I've made a similiar decision to pay ever increasing property taxes to live 20 minutes by bike to anywhere inside the core. I might be mad that Kitchissippi taxes go up faster than anywhere else in Ottawa. I might even suggest alternatives that would lower my share of Ottawa property taxes. But I won't pretend it's Ottawa's fault that this is the way it is today and my problem should be subsidized away. I bought my house knowing I was going to pay more for proximity to employment. That's my opportunity cost.
It's unpopular for politicians to tell truth to voters, but the fact is Orléans residents knew (or should have known) they were getting cheaper homes in lieu of proximity to 'good' employment. The onus is not on Ottawa taxpayers to resolve that issue. Though ironically the land-value-taxation system I wrote about would have long ago spurred the owners holding the employment lands in Orléans to build or flip the land to someone who will long ago.
Sadly our current property tax system rewards them with long-term speculation. If you wait long enough, politicians will pay you to develop the land and hire people!