Economic development will be vital to New Westminster’s future

Population growth by age in the New West trade area (including Burnaby and the Tri-Cities). Source: Urban Futures Institute

Population growth by age in the New West trade area (including Burnaby and the Tri-Cities). Source: Urban Futures Institute

At the New Westminster Economic Development Forum on Thursday, Andrew Ramlo from the Urban Futures Institute presented some unsettling insights on upcoming demographic changes in the city, and shared some truly geeky statistics illustrating New West’s economic strengths and weaknesses. A few pertinent highlights:

  • New Westminster, while attracting large numbers of adults in the prime working years between 20-55, will face the same tsunami of grey as the rest of the region when the Baby Boomers retire. Because of advances in health care, the population will remain overweighted by seniors for a long time.
  • New Westminster’s biggest economic ‘exports’ are health care and education. Fraser Health and Douglas College are the two biggest employers in the city. Public sector employers (school board, city staff, other government organizations) are also a huge source of jobs in the city.

To me, this highlights the need to focus now on economic development in New Westminster because:

  • Seniors pay lower property taxes while requiring more tax-funded services
  • Hospitals and educational institutions are exempt from paying property tax, so expanding these institutions, while providing jobs does not provide more tax revenue to the City (note: other levels of government sometimes provide grants in lieu of taxes to offset some of the cost to cities, but it doesn’t always make up for the lost revenue)
  • City governments depend on property taxes to fund services and infrastructure improvements, and are restricted from demanding other forms of taxation
  • New Westminster has one of the more dense concentrations of nonprofit organizations in the Lower Mainland, and most of those organizations don’t pay property taxes either
  • There is very little undeveloped land remaining in the city that could be built up in order to increase tax revenue

Tax-exempt nonprofits and institutions benefit from city services, yet don’t put money back in the pot. The rationale for this is that these types of institutions provide a great social benefit to the city and its public, which justifies exempting them from paying tax. That’s all well and good, but what happens when a city has more than its share of nonprofits within its borders, and then also suffers a drastic reduction in the size of the taxpaying population?

This makes me concerned about the long-term sustainability of the City’s finances. The City’s largest employers are not paying property tax, and ever-larger numbers of residents will be getting significant breaks on their tax bills as they reach retirement age. Meanwhile, there’s a ton of city infrastructure that needs upgrading, and provincial and federal governments keep offloading responsibility for vulnerable populations such as the mentally ill and the homeless to cities. That leaves an ever-larger tax burden for those of us who are under 50.

This is the same story across North America to some extent, but I believe that when you look at New West, we are currently not as well equipped to balance out declining residential property tax revenues with business tax revenue. Because we do have such a high concentration of nonprofit, government, healthcare and educational employers, and because we have so little commercial property, I fear this makes our city more vulnerable than others unless we take action now to strengthen our economy.

The answer isn’t just to attract younger people to pay the taxes the seniors are exempt from. There just aren’t enough young bodies to balance out the immense impact of the Baby Boomers. As I see it, the City needs to act now to diversify its sources of revenue. As I mentioned, the City is limited in its ability to impose new taxes, but it does have other sources of revenue already, including Development Cost Compensation (DCC) from new development, as well as grants from other levels of government, various licenses, fees and fines. But a key missing link in New Westminster is economic development, not just continuing to add more tax-exempt government-funded and non-profit jobs, but attracting more new for-profit businesses to this city.

Comparison of street front rental rates in the Lower Mainland. Source: InvestNewWest.ca

Comparison of street front rental rates in the Lower Mainland. Source: InvestNewWest.ca

New Westminster is succeeding at attracting some new large employers. The TransLink offices, for example, will be opening soon at Sapperton’s new Brewery District development, but as as I mentioned in my last post, we need to reach out to both large and small businesses. Currently I see a revolving door of small businesses in this town. We have some of the most affordable commercial rents in the Lower Mainland, and I think that attracts newbie entrepreneurs to jump in and invest without the financial cushion to soften the inevitable blows that every new business endures in the critical first few years. The City can’t take away the risks of business ownership, but it can provide more leadership in identifying the types of businesses that we believe would thrive here, actively recruit more employers to set up shop in New Westminster, and provide support to our current businesses to stay in New West and grow their businesses.

An artist's rendering of the new Civic Centre and Office Space. Source: City of New West.

An artist’s rendering of the new Civic Centre and Office Space. Source: City of New West.

This is also why I have come to believe that the City’s decision to proceed with building the class A office space above the new Civic Centre was a risk it had to take. One of the reasons why it was so important to incorporate commercial uses into the Civic Centre project was the implications for tax revenues: had the City built only the Civic Centre (and not the office tower & commercial spaces) the cost to build would have been lower, but the City would lose the opportunity not only to boost the economic activity of downtown (through jobs and in-town spending by employees & businesses) but also lose out on the estimated $660,000 in annual tax revenues from the office space. It would be just one more parcel of prime New Westminster real estate that’s a cost centre for the city, not a revenue-generator.

Today the economic development activities the city undertakes include offering information and statistics, help with site selection, providing business and community contacts and helping with government approvals. That’s good work, and business licenses have grown at three times the regional rate in New West between 2009 and 2011. But it is not enough.

New Westminster needs to present a vision that inspires businesses to want to locate here. It has to provide incentives for residents to shop here, and support local business in getting the word out beyond our borders. The business community can also do more to support each other, through partnerships, mentorships and cooperation.

In short, although we’ve come a long way from the ’90s decline, we still have a long way to go. Strengthening our economy is something that we can all play a part in by shopping locally, starting businesses here and spreading the gospel of New Westminster beyond our borders to let the world know how great this city is to live, work and play.

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13 thoughts on “Economic development will be vital to New Westminster’s future”

  1. As someone who volunteers for one of those tax-dodging not-for-profits, I can only say we pay our full utility costs (including metered water) and provide a recreation facility at no cost to the City – but that is an aside to your main point.

    We may also have to review the policy of offering property-tax discounts to seniors. The Baby Boom generation is not just the largest demographic, they are increasingly the richest, and use as much or more of the very municipal services that are picking up slack as the senior governments “rationalize” their services.

    I am glad you tied in the new MUCF to this story – attracting new businesses that pay taxes will be vital. Gordon Price just outlined a trend for which New Westminster is perfectly poised to benefit:
    http://pricetags.wordpress.com/2012/11/12/urban-s

    1. Pat: I actually think it makes sense for nonprofits who provide a measurable benefit to the community to be exempt from taxes. I know it can be hard for those organizations to secure the funding to keep working, and every bit helps. My concern is more the ratio of nonprofits to taxpaying businesses in this city, and the sustainability of the overall tax base as we hit that critical mass of Boomer retirees.

      As for seniors losing their property-tax discounts … good luck with that one. They will continue to be the largest voting bloc for a long time yet, and Boomers are used to getting their way. I'd like to see the politician who would be willing to take that on.

      I do think that governments will have to tighten up the rules on which nonprofits qualify for funding, and it may also make sense for them to increase the age at which seniors qualify for tax breaks, especially since health advances mean that more seniors are working longer than they could before. I would also like to see the provinces revisit tax-exempt status for churches. I think that churches who operate social programs with a measurable benefit to the public (Shiloh's Hospitality Project, for example) would continue to qualify under the same rules as other charities/nonprofits. Churches who offer no broader social benefit to society however (and there are a few who have no social outreach arms) should not qualify for exemptions in my opinion.

      1. I agree Brianna, anyone taking on this council on any anti socialist issues will be assassinated by the current regime (Just ask me!) However, I hope some NextUp business people will step up to the plate (not City Staff members or politicians who already have socialist leanings).

    2. Good one Pat, but the Seniors have paid taxes all their life and continue to do so while supporting the majority of socialists residing in this City. In case you are unaware, it still costs seniors $4 to go to one of these city facilities to exercise. As for your comment about MUCF attracting business, The taxes derived from that facility will cover only the wages of City staff on site, many who do not reside in New West. I am keen on building business in this City and paid dearly in my attempt to do so. So, I have a good understanding of the negative political climate of our governance and the pathetic economic development effort of staff…. I hope some of the NEXT UP members have the guts to run in the next election in support of free enterprise to really change the face of New West.

      1. It's hard to charge for something previously free. My father-in-law says that he's paid for his rides on the ferry his entire life, and now that he's a senior, it should be free. But what if he moved to BC from Alberta on his 55th birthday?

        Many of these perks for seniors came about when people didn't live nearly as long, and were not financially well off. It was a reward that was expected to be short-term.

        If you live to be 90, and are classified as a senior at 55, that's 25 years of free rides, but their not really free – someone has to pay. It could even be other seniors, as the costs trickle up to the Provincial level and other programs are cut to pay for it.

        If seniors don't want to pay because they've paid in the past, and socialists don't want to pay because (insert your own inflammatory reason here – dirty hippies, leftist commies, etc), maybe we should make both groups wear the letter S and be done with it.

    3. The image (spectre?) of the rich boomer often gets thrown around and certainly, it seems boomers and those slightly older are sitting on a lot of real estate wealth, at least in Vancouver. I found this stat from a story in the Globe and Mail: "[Bob] Rennie says Vancouverites between 55 and 74 years old have clear title to $88-billion worth of homes, according to new statistics supplied to him by Landcor and Urban Futures." I'm not necessarily against changes to the property-tax discounts, but I do wonder how real the "rich boomer" is, especially in New West, where many seniors live in apartments and condos. They may have already downsized to smaller residences and are relying on the proceeds from the sale of their larger homes to last the rest of their (likely to be long) lives. Making a change to the discount might be easier to sell politically if it was tied to not just age, but also income.

      1. I think some are, and some aren't. I know some boomers that sold a million dollars in real estate, moved to a condo, and have multiple pensions close to what their original salaries were. They have recreational property, boats, and take nice trips to tropical destinations several times per year.

        I'm sure there are many out there that aren't nearly that well off.

        Some benefits are tied to income, but not all. I suspect that will slowly change.

        Housing appreciated as interest rates went from 20% to 3%. It's unlikely to happen again, and akin to winning the lottery. And like the lottery, it's not considered income, and therefore won't play a role in determining if a senior gets a discount.

  2. Excellent post Briana. I would like to add that focusing on technology sectors will be important. Companies that are innovative in digital, wireless and information communication should be able to make use of the new office space above the Civic Centre. Life sciences and engineering companies can also make a home here in New Westminster, but probably not in the new building (they need special infrastructure, like HVAC, etc.).

    Digital companies are fleeing Vancouver for other provinces (i.e. Rockstar Games). The City of New Westminster should be trying to catch them before they leave.

    1. 100% Jason. Although New West has an Economic Development component, well staffed and with access to consultants, real.credit goes to businesses like Uptown and Wes-Group for encouraging and facilitating businesses to locate in New West. With the central location and transit in place the city should be offering incentives somewhat like Surrey has done to steal away potential business. When I hear comments like "New West City Council is not business friendly", it concerns me.

  3. Great article but you may be generalizing on some of the economic analysis.
    Seniors pay less propery tax? Are homeowner grants to seniors eventually paid by the province to City? And are "grants in lieu" also paid by Province/Feds for some of the instutional properties?
    Not sure if a full analysis would prove out that seniors and non-commercial uses are a drain if ALL costs and revenue are acounted for.
    I do agree it's always good to diversify, but the economics of some assumptions seem tentative!

    1. Very good points Keith! I am not an expert on these things and it is very complicated. I am hoping that if there is more to the tale, someone will share their insights here. Grants-in-lieu would not apply to nongovernmental organizations registered as nonprofits in the city, but depending on how generous they are, it could significantly offset the impact on city tax income. As for seniors' homeowner grants, I have never heard that the grants are reimbursed by the province, but even if so, it's still working taxpayers who foot the bill right? In that case, the impact on city finances might not be as dire as I thought, but the burden on other taxpayers remains significant because of the sheer number of retirees who will be eligible to claim benefits.

  4. Homeowner grants at all levels (basic, additional etc.) are provincial, not municipal. As for the "working taxpayer" footing the bill, one could say the same about the Canada Child Tax Benefit – it's paid for by all taxpayers, but seniors don't benefit from it. There is an issue about numbers claiming benefits versus numbers paying to maintain them, but to be able to analyse it correctly, we have to keep the facts straight. Not easy to do when it is so easily politicized.

    1. Hi Dale,

      It sounds like you know more about how these grants work than I do! Prior to writing the article, I did a bit of research on municipal property tax exemptions (as I wasn't sure what qualified) but I am aware there are nuances to how these things work that I am not aware of. When you say the grants are provincial, do you mean that there is no net impact to municipalities? My concern is twofold, based on my understanding of how property tax & grants work: that municipalities would see declining revenues because of having so many people paying less property tax (via seniors' grants), and that providing these grants to seniors might not be sustainable because the proportion of seniors to working adults will be so large (causing potential difficulties in funding these programs). It may be that the province offsets enough of the loss to municipalities for nonprofits & seniors not paying the full property tax dues that my concern about city revenues is unfounded (in which case, phew!) but I think everyone should be concerned about how we're going to continue to fund social supports for seniors when we hit that tipping point when there are vastly more people out of the workforce and paying little or no tax vs. people who are contributing to government programs. Note: I am well aware that seniors *have* contributed a lot of money into the system, but this doesn't change the fact that in general governments are already in debt, and going forward it will take more tax revenue, not less, to sustain our current level of social programs.

      The issue I have isn't that taxpayers are paying into programs that others benefit from – that is a given – it is the scale of benefits that will be paid out and the sustainability of continuing these programs given the massive demographic shifts that are about to take place that have me concerned. The Child Tax Benefit is not really a great example – Canada's birth rate is not high, and is projected to decline further. In the future, all population growth is projected to occur through immigration, not procreation. So we don't have the same issue of scale to worry about there.

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