Workshop for Economic Development Officers

Report on Workshop for Economic Development Officers

Royal Botanical Gardens, Burlington ON – September 27, 2013

November 12, 2013

Prepared by Ken Delaney

Background:

On September 27, 2013, the Automotive Policy Research Centre at McMaster University and the Town of Oakville hosted a workshop for Economic Development officials from municipalities with significant automotive production. The purpose of the event was to engage APRC’s Academic Partners and Advisory Group in a discussion with Economic Development practitioners about the role of municipal governments in attracting and retaining automotive investment in their communities; and help the Town of Oakville and the Economic Development practitioners prepare for a roundtable discussion among the mayors of 17 automotive producing municipalities scheduled for October 23 and 24.

Central to the operating philosophy of the (APRC) is the commitment to engage industry stakeholders in an interactive process of advising the APRC management team and researchers on how to shape the research agenda so that it is truly relevant to the industry and its stakeholders. The workshop for Economic Development officials offered the APRC management team and researchers a great opportunity to learn from practitioners.

Ford Motor Company is Canada (Ford) deserves special mention for its role in creating the opportunity for APRC to conceptualize and co-host this event. Ford is one the industrial partners in the APRC and introduced the APRC management team to the Town of Oakville officials involved in planning the October meeting of mayors.

Participants included Economic Development officials from Oshawa, Oakville, Kitchener- Waterloo, Windsor, Woodstock, Hamilton, St Catherine’s and Ingersoll. There were four of APRC’s Academic Partners and seven Advisory Group Members in attendance as well as a number of APRC student researchers. Three of APRC’s industrial partners sent participants (Ford, Unison, and the APMA) and all three members of the APRC management team were present.

Opening Panel:

The day started with presentations from Dr. Charlotte Yates and Wayne Lewchuk of McMaster University; Len Magyar of the City of Woodstock; and Kim Hill of the Center Automotive Research in Ann Arbor.

Dr. Yates set the tone for the discussion by emphasizing the importance of collaboration between industry, government and academia in encouraging economic development. She pointed out that government is increasingly an important co-investor when the automotive industry makes capital expenditures. She cautioned that most analysts are predicting that investment in automotive production capacity will be low in Canada relative to other major automotive producing regions. This is of concern to economic development officials because of the high “job multiplier” effect that automotive investment has. She also talked about the important of various automotive clusters that exist in Southern Ontario (Windsor region, Kitchener/Waterloo region, Oshawa region, etc.).

Len Magyar shared his experience with securing Toyota’s investment in Woodstock, and called his presentation “What would happen if you went fishing and caught a whale?”. He described how the Province contacted Woodstock and asked it to get started putting together a land package without identifying who the potential investor was. So Woodstock had to put together a large land package that would cross county lines without knowing who the unidentified investor was, and while trying to avoid allowing the public know that a large investment was being considered. In fact, Toyota was looking for a site within an hour’s drive of its existing facility in Cambridge. To help with this challenging situation, Woodstock hired a consultant to put together the plan to acquire all the required land. Challenges including: working with neighbouring municipalities; legislative restrictions (acting on behalf of unknown client, acquiring land in another municipality, etc); approaching property owners who were not previously considering selling; maintaining confidentiality and handling media inquiries; and providing the infrastructure that Toyota needed.

Kim Hill described the work of the Center of Automotive Research in Ann Arbor and spoke generally about the experience that U.S. municipalities have had in attracting automotive investment. He expressed doubt that any new assembly plants would be built in the Great Lakes region – either by the big three or by offshore based producers, and recommended that Canadian municipalities focus on upgrades to existing facilities. He indicated that CAR tracks incentives offered in the U.S. in what they call their “book of deals”. He reviewed some of the ways investment work in the U.S. and indicated that cost sharing of at least 50/50 on capital cost is required to attract investment as well as infrastructure support. He told participants that there is more flexibility in the Southern U.S. to offer tax abatements and “free land” than there is in Canada, and that significant training support is often offered. And he indicated that automotive companies have demonstrated a desire to “have a close working relationship” with municipalities when they make investment decisions.

Group Discussion:

Participants had the opportunity to ask the panel questions, and then joined smaller discussion groups to consider the issues listed below.

What Municipalities Currently Do & What Works and Doesn’t Work:

Infrastructure support (including doing everything possible to ensure adequate transportation routes), acquiring land, and industrial zoning are all traditional tools of municipal economic development that are important, and most participants agreed that municipalities should use these and whatever other tools they have to attract automotive investment.

Some additional suggestions included developing strategies to protect large parcels of land for industrial use; developing a database of shovel-ready sites available; developing a solid understanding of automotive sector issues and of automotive production in neighbouring communities; and implementing city-wide Community Investment Plans enabling municipalities to provide certain tax incentives normally reserved for particular zones. One participant indicated her municipality annexed larges parcels of property in order to be able to sell the property potential large investors at attractive prices.

There was little support for the idea that municipalities can provide cash incentives or co-investment to attract automotive investment. Generally participants thought such co-investment was the role of federal or provincial governments. In fact some participants thought that infrastructure and transportation were more important than cash incentives. Many participants emphasized the need to work with provincial and federal governments and attempt a collaborative approach to attracting investments. Participants also pointed out that municipalities are constrained by the Municipal Act and don’t have tools at their disposal like SR&ED tax credits, etc. Participants did think there was room for creativity around waiving or reducing development charges. However, some particpants also pointed out that reducing development charges could mean less money available to develop infrastructure.

Participants also indicated that there are very few opportunities to attract new plants (like the Toyota plant that Woodstock attracted), and that focussing on retaining the capacity they have is a better strategy. Several participants also expressed a preference for attracting a number of smaller auto parts producers rather than a large single assembler (diversification was the rationale). Others emphasized the importance of regular meetings with representatives of larger producers (like GM in Oshawa) if there is one in your community.

Participants recognized that making the case for new automotive investment is very challenging, but also believed it was important to do so, just to demonstrate interest in the sector. Simply expressing public support for the sector and for manufacturing generally was seen as an important way to signal that communities value automotive production.

There was also widespread agreement that local R&D centres, good educational and training infrastructure, and a highly skilled workforce are strong selling features of Ontario municipalities.

There was considerable emphasis on the importance of universities and academic collaboration with industry on R&D. CANMET, McMaster, the University of Ontario Institute of Technology, Waterloo, and a number of community colleges were all identified as strong selling points when attracting investment. Facilitating relationship building between universities and industry players was seen as important.

There were also significant differences noted among the municipalities and their approach to attract investment or re-investment. Oshawa has to deal with the fact that it is east of the GTA and therefore traffic is problem except with part suppliers in the General Motors supply chain. Windsor officials believed the city’s proximity to south eastern Michigan is important, allowing them to focus on tool & die and robotics companies that can service the industry across the border. Differences were also noted in how actively municipalities went after investment. Participants thought that Kitchener Waterloo was more reactive in its approach than Windsor, and since Oakville is more of a “commuter town” than some of the other municipalities, economic development is perceived by some in that region to be less important.

Finally, there was discussion among some participants about funding from other levels of government:

Officials from Oshawa felt disadvantaged because they were not able to access the South Ontario Fund for Innovation and Investment ($20 m fund from Fed Dev ON)
Participants noted that funding from Ontario Works (ON Ministry of Community and Social Services) was available to employers providing jobs in high unemployment areas.
One discussion group also pointed out that the Federal Government’s Invest Canada-Communities Initiative is one source of funding for economic development initiatives, but expressed disappointment that it provided funding only for municipalities and not manufacturers.
Some participants felt that Fed Dev ON has been inwardly focussed in the past but is now opening up to work with municipalities more, although will less money. Nonetheless, participants thought it was important to become knowledgeable about Fed Dev programs.
Marketing Municipalities

Participants thought it was important for municipalities to market themselves as an attractive location for automotive investment. However, they thought it was most important to market themselves within the community – in other words, push for re-investment by existing manufacturers.

Some thought participants thought that becoming more aware of existing federal and provincial support programs would enable them to more effectively market themselves. Some thought it was important to visit home countries of current (and prospective) investors.

Finally, participants thought municipalities should put more of their own tax dollars into economic development. While there is room for regional economic development bodies, the municipalities themselves should be more involved. Some municipalities have only one staff person focussed on attracting investment, and participants felt that is inadequate.

Are Municipalities Too Constrained by Current Restrictions?

Some participants thought there were too many constraints on municipalities offering incentives, particularly when compared to the United States. But considering the reservations about cash incentives expressed by a number of participants, it is not clear what kind of flexibility is desirable. Some participants referred to practice of offering incentives as a “mugs game” and a “slippery slope”.

What are “Best Practices” Once a Municipality is a Candidate in a Site Selection Process?

Participants thought it was important to bring local utilities into the pitch as partners; to ensure the local eco-system is ready; to emphasize current cultural and business relationships with the company and its home country; and emphasized the need to be prepared (i.e. develop a “pitch” and give it a dry run among partners before meeting company; become knowledgeable about school absentee rates; etc.). Participants also thought it was important to focus on available buildings as well as available land.

What Provincial/Federal Supports do Municipalities Want?

Participants indicated the importance of a National Automotive Strategy, better promotion of existing federal and provincial programs, and better coordination of economic development activity between the three levels of government.

One participant thought it would be helpful to have some support programs, perhaps a form of SR&ED tax credits, that were design for smaller and mid-sized producers.

Another thought the infrastructure challenge was so important and so great that there should be more federal and provincial support for transportation and infrastructure in municipalities with automotive production.

Some participants indicated that greater subsidies from the federal and provincial government were also needed, and one participant indicated that the federal or provincial subsidy particularly focus on new greenfield sites, covering a greater percentage of the construction cost.

Infrastructure Support and Facilitating Construction

Infrastructure support and facilitating construction was seen by participants as essential. Highway expansion to Woodstock was essential to Toyota. Participants from Oshawa, concerned about being on the wrong side of Toronto from a traffic perspective, believe completing the 407 is important.

One participant indicated that good wi-fi infrastructure is important, particularly if Canadian municipalities are going to attract investment from the growing list of companies that develop software, wireless communications, and infotainment systems for vehicles.

Participants seemed to want to include labour markets in the infrastructure discussion. A skilled workforce and a strong talent pool was identified as very important in attracting investment and something that Canadian municipalities and the Province should focus on as a key competitive advantage. One participant indicated that in Mexico, government is more active in “creating skilled employees” through training programs than allowing the market to dictate the size and nature of the labour supply.

Some participants thought that dialogue and collaboration on training and skills issues between industry and community colleges & universities should be improved. Better labour market information, training subsidies and providing smaller parts makers with “guidance on training programs” were all identified as helpful.

Participants also indicated that basic social, health care, recreational and educational infrastructure is also important in attracting investment

Different Strategies for Different Auto Companies

Participants did not come up with a lot of suggestions for adjusting strategies based on the size or ownership of the company, perhaps because discussion on previous questions and issues drifted in the final question session for some work groups. One participant seemed to think that rail transport was more important to assemblers than to parts makers. The case of Toyota and Woodstock seemed to indicate that very large players wish to maintain anonymity when selecting sites.