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.