Development Charges Will Halt Manufacturing Growth

The London Region Manufacturing Council (LRMC) has taken a strong position in opposition to the City's proposal to impose a development charge on industrial growth.

Currently in its third year, the LRMC seeks to promote the continued growth and prosperity of the London Region manufacturing sector by engaging the manufacturing community for the purposes of raising awareness; and promoting local manufacturing regionally and beyond.

Manufacturing brings high quality jobs, industrial tax assessment year after year and spin-offs to London businesses through supplier relationships.

Development charges are fees the city would impose on new development to defray the costs of providing hard services such as water, sanitary sewers and roads as well as soft services such as fire and police protection.

The development charge proposal being considered by the City of $1.86 per square foot would result in a one-time charge of $186,000 on a typical 100,000 square foot building. This one time cost is enough to send prospective investors to other communities.

Unlike commercial businesses, manufacturers do not rely on local consumers or suppliers. Manufacturers have the choice, and increasingly, the business necessity to locate their facilities in communities where costs are low and a labour supply is within commuting distance.

The reality of business is that manufacturing executives will put the interests of their share holders above London's interest and make new investments in the communities around London that do not impose an industrial development charge. A new manufacturing investment in a nearby community will still service the purposes of most manufacturers and save a great deal of up-front costs.

And it's not just companies looking at London that will recoil from industrial development charges. Existing manufacturers will be hesitant to relocate to London and take on new business and workers if development charges increase their up-front costs.

Some local manufacturers have already indicated to the LRMC that they would not have selected London if development charges had been a factor at decision time. Multinational manufacturers have made it clear that investment decisions are made in other countries and on the basis of cost. Capital is mobile and it moves to locations that offer the best cost advantage.
The loss of continuing annual tax revenues from even one new manufacturing plant choosing not to locate in London will easily cancel any perceived benefit of an industrial development charge on the facility.

London has worked very hard in the past five years to prepare the right business climate to attract new manufacturing plants, and to retain and facilitate the expansion of existing plants. London's investments in the London Economic Development Corporation (LEDC) and an Industrial Land Strategy have proved successful with nine new manufacturing plants and the creation of more than 1600 high quality manufacturing jobs in the past five years. This figure does not include the spin-off jobs created.

London's Industrial Land Strategy has resulted in several new industrial parks, including the virtually sold out Forest City Industrial Park. London is currently selling the new Skyway Industrial Park and is preparing to invest millions more to prepare the Airport Road South Industrial Park. These initial investments are paying off in new manufacturing growth in London.

London is also preparing to invest millions of dollars in twinning Airport Road in order to ease traffic congestion on this vital transportation access for our growing industrial base.

Given all of this important community infrastructure investment designed to attract and retain industrial investment and the jobs that flow from this investment, it does not make sense for London to then damage our opportunities for future success with a new upfront tax in the form of a development charge.

While manufacturers understand the City's need to generate revenues to pay for improvements to local services, the proposal to implement a development charge on manufacturing will have an extremely negative impact on manufacturing growth resulting in lost jobs and tax revenues to London while giving a gift to communities competing for industrial investment and jobs.

www.manufacturinglondon.com

Denis Crane is the Chair of the London Region Manufacturing Council