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Toronto Industry Network's Response

GENERAL STATEMENT

Toronto's industry is in crisis. In 1981, almost 267,000 people were employed in manufacturing. In 2000, there were 164,000 full-time manufacturing jobs in Toronto. This shrank to 159,000 jobs in 2003. If Toronto is 'one of the world's most cost-competitive cities for business', why does industry continue to flee, often a short distance, to the GTA?

The majority of the City's manufacturing jobs are skilled, well-paying positions that reflect varying degrees of training. Each job in manufacturing generates jobs in other sectors that help service manufacturing or amongst the customers that buy manufactured goods. The member of the Toronto Industry Network employ approximately 35,000 full-time employees and this activity generates an additional 85,000 jobs amongst suppliers and direct customers. When companies leave Toronto, the loss of employment has a very direct ripple effect.

The response of some to the loss of industry is to shrug and say there are lots of opportunities for those seeking work. However, there may not be similar replacement jobs in Toronto. The loss of quality jobs is not abstract but very real. It impairs the ability of Toronto to excel.

The loss of manufacturing, along with other businesses, places additional burdens on remaining ratepayers. When large water users such as Labatt's leave, the City loses important water revenue and the shortfall is spread amongst the remainder. Industry pays a disproportionate amount of property tax and when it leaves, others have to pick up the slack. Loss of employment is weakening our economic diversity and reduces the opportunities for our young people.

SPECIFIC COMMENTS

Positioning Toronto

The Toronto Industry Network commends the City, and particularly the Finance Department, for taking the initiative to develop a blueprint to restore business confidence and viability. It is essential to have a long-term plan to provide a degree of certainty for Toronto's business community. We believe the City's goal should be to reduce its costs and taxes to the point that Toronto will be identified as one of the least expensive places to do business in North America.

Toronto's Economic Development Strategy

Any improvements to the current City tax regime must be done in co-ordination with the City's Economic Development Strategy.

Reducing Tax Ratios

While reducing the residential-business tax ratio is essential, the 15-year timeframe proposed in this paper to reduce tax ratio to 2.5 times is not viable. The timeframe does nothing to address the current ongoing loss of industry. The length of the process encourages slippage because it is so long. It sends a strong signal of a lack of commitment to the problem. We project that at the current rate of attrition, most industry will have left in 10 years because decisions will be made not to reinvest in existing plants. TIN recommends that the tax ration be reduced to 2.5 times by 2011.

We do not subscribe to Finance's proposal that up to one-third of any residential tax increase be passed along to C, I and MR classes. This just defers the tax reduction schedule. If anything, the City should impose a tax freeze on business or the next five years until the tax ratio has achieved its goal. Then it is possible to contemplate tax increases for business.

Regarding the concern about increasing residential rates, if there is little industry left and if the office sector continues to leave Toronto, then the remaining residents will have to shoulder the additional burden anyway. It is essential to have viable industry and other non-residential sectors to help share the cost of running the City. Perhaps the City would consider a special program to help those on fixed incomes with their property taxes. [Does one already exist?]

Reducing Costs

We see little attempt by the City to reduce costs. Generous labour agreements, the growing exclusion of the private sector from the City government's procurement programs, strangling regulation, etc. build in costs and stifle innovation and competition.

Regarding cost reduction, industry is not perfect but has been forced to cut costs significantly during the past decade. Many companies have trimmed costs by at least one-third during the past five years and have emerged as better companies. TIN challenges the City to do the same thing through a comprehensive cost-reduction plan. This is hard to do but very necessary. TIN is willing to help with ideas on this issue.

Business Education Tax

TIN supports the City's position that the Business Education Tax has to be brought in line with the rates levied in the Greater Toronto Area. However, the City in pressing the Province for this reform, must demonstrate better management of its own costs.

CVA-Taxation

The Network supports the City's point of phasing out the capping/clawback regime but this too must be done over five years.

Lower Tax Rates for New Industrial Construction

This factor could be a very powerful tool in attracting new and retaining existing industry in Toronto.

Permits and Fees for New Industrial Construction

It is our view that these permits and fees are taking the place of development charges that the City does not apply. This blunts the miniscule competitive edge the City has over its GTA counterparts who levy substantial development charges. Any permits and fees must reflect the true costs and be competitively priced.

New Sources of Revenue

As the City thinks 'outside the box' to find new ways to finance its operations, it might consider applying a small sales tax when properties are sold as well as a tax on the commissions of real estate agents. Developers could be taxed on the increased value of their properties due to zoning or variance changes. This would discourage the re-development of industrial neighbourhoods to non-industrial uses.

Streamlining the Approvals Process

The length of time and the sometimes conflicting interests within the City regarding approval of new development are of concern to TIN. An informal survey of our members indicates mostly a negative view of the current approvals process. [Is everyone okay with this?]

Focus on Business

We are in favour of participating in a Mayor's Roundtable on Business only if it will have an effect on the future course of events. A Roundtable could set priorities that would help staff properly resource initiatives that will retain existing and encourage new business development.

TIN has advocated for sometime that better communications needs to exist between departments generally regarding policy development and regulation for industry. That was part of our message to of the Economic Development Committee on July 4 of this year. Anything that would cut away at the layers of bureaucracy and give industry clear answers would be welcome.

An outstanding communication program is essential to encourage debate and to keep everyone informed as the City moves ahead with its plan.

CONCLUSION

The Toronto Industry Network is very pleased to be asked to be part of this consultative process. Our comments are made not only in the context of enhancing industry's position in Toronto but also with a view to making our City great again. We recognize that what we are proposing will be difficult to implement but without a drastic overhaul of its tax structure and operations, Toronto will continue to decline. Does Toronto need to become like New York was 20 years ago or Detroit is today?

With the changes to the City of Toronto Act and other new measures, comes an opportunity for Toronto Council to make a real difference. We believe time is of the essence and that the City must make decisive policy decisions that will support industry. Stretching out what has to happen now over 15 years sends the wrong message to industry.

Industry has a very real stake in making Toronto successful again. It is not only the investment reflected in the manufacturing infrastructure, it is the stake thousands of Torontonians, employed by industry, have in the future of their City.

Link: Toronto Industry Network