How Langford Mayor's proposal for 10 year business tax holiday damages the both Langford and Greater Victoria
October 27, 2016
The Mayor of Langford has proposed a 10 year tax holiday to attract business to west shore, Times Colonist, October 25, 2017
Two important issues are at play: the economic argument, and the political argument and how we fail to function as a metropolitan region.
There is a fundamental problem of how we look at Greater Victoria's governance – in this case its economic health. Do we see it as a series of disjointed, unconnected municipal islands, or do we acknowledge we are one geographically small, interconnected regional community? It was recently described unflatteringly as “pixelated governance”, a series of unconnected dots, much like a computer screen.
There are losers and then there are losers in the Mayor's proposal. If businesses re-locate, the former municipality loses tax revenue, but Langford gains no revenue for 10 years, resulting in a net loss to the region over 10 years. This is commonly known as the “race to the bottom”.
The economic arguments against tax holidays are supported by a number of studies on tax incentives within a metropolitan area. Three major obstacles:
- Incentives are unlikely to have a significant impact on a firm’s profitability, since property taxes are a small part of the total costs for most businesses -- averaging much less than 1 percent of total costs
- Tax breaks are sometimes given to businesses that would have chosen the same location even without the incentives. When this happens, property tax incentives merely deplete the regional tax base without promoting economic development.
- The widespread use of incentives within a metropolitan area like Greater Victoria reduces their effectiveness, because when businesses may be able to obtain similar tax breaks in other jurisdictions, incentives are less likely to affect business location decisions.
Don't compete. Cooperate instead. Municipalities would be better to consolidate to spur economic development. The fates of communities in a metro area are often intertwined because the economic benefits of a new company accrue to the entire area, (not just to the individual jurisdiction that hosts it), as the firm hires workers from throughout the region and contracts with businesses from neighboring cities.
The Mayor of Langford is acting in the self-interest of his municipality, which is arguably a good thing for Langford, and a fundamental problem for Greater Victoria governance where there is no regional approach.
It's important to note that the Mayor's idea has not yet been approved by Langford Council. Also, the Mayor does not, by his own preference, sit on the CRD Board (all other mayors in CRD are Board members). Langford has a tendency to go it alone, and this is understandable given the decision-making process of the CRD.
Much like Langford's taxpayer-subsidized Langtoria bus service, a dubious business venture, created instead of working for the betterment of Langford citizens and the region. In that case, the Mayor cited a potential failure of the bus as an indication that people are unwilling to get out of their cars. But is this a fair assumption? Can you compare direct rail service to travelling in a bus in the same old traffic congestion?
Economic health ties into the regional transportation problem and the urgent need for a regional transit authority. Langford has declined to approve such an athority at the CRD, which raises further questions for Langford residents.
Remember the South Island Prosperity Project, (SIPP replaced the Gr. Vic. Economic Development Agency) and is less than one year? To date, Langford (along with Sooke & Metchosin) is not part of this agency that is designed to improve economic development south of the Malahat.
But even so, SIPP is a voluntary agreement, and as with the casino issue, municipalities will fight to ensure their neighbourhood comes on top, to the detriment of adjoining communities.
But the SIPP agreement also highlights the major problem with all voluntary integrated services or shared services agreements They are voluntary. There is no enforcement, so a municipality can withdraw on the whim of its council. The same applies to the 350+ agreements made through the CRD. We've seen that with the Integrated Crime Unit, Regional Domestic Violence Unit, Dive Team, and Fire Suppression Mutual Aid agreements from which municipalities have withdrawn.
The public voted in Novovember 2014 on various questions related to reforming our local government. 80,000 people voted and 60,000 voted YES, that's 75%. At the time, Premier Christy Clark commited to an amalgamation study, but since then the current Minister has dragged his heals for a comprehensive study of amalgamation (and failed to achieve his mandate letter from the Premier to make recommentaitons on amalgamation to Cabinet by this past June 2016).
Instead, the Province has engaged consultants (Urban Systems and Circle Solutions) on the Capital Integrated Services and Governance Initiative report due end of October/early November. The focus will be on shared services only. The Minister said it was the first stage in long process, so we will be watching on behalf of the voters of Greater Victoria to ensure the Province respects the democratic will of the people. A comprehensive amalgamation study is absolutely necessary and the people of Greater Victoria must be given the opportunity, in a future binding referendum, to to vote and shape their community in the future.
- Lesley Ewing
(excerpts from CFAX radio interview, Adam Stirling, October 26, 2017)
Other "Go it alone" examples:
- Oak Bay's ineffective dear cull
- Sidney's approval of a strip mall development on airport lands (corner Beacon Avenue and Highway 17)
- CRD Regional Growth Strategy, where individual municipalities have failed to approve a regional approach to containing growth in Greater Victoria.