Northern Ontario to become Tax Incentive Zone : Thunderbay IMC

Facing years of economic struggle and a decreasing population including a massive exodus of youth, it is safe to say that Thunder Bay desperately needs a fresh development plan. As of January, our entire region will be converted to a Tax Incentive Zone based on the premise that attracting foreign investment with economic incentives will create a larger tax base and will create a sustainable development agenda for Ontario outside of the golden horseshoe.

There have been a series of municipal economic plans put forth by Northern Ontario communities including Thunder Bay that were rejected by Queen’s Park as to not create “pockets of development” in favour of a blanket development zone that will cover the area from Parry Sound to North Bay to Kenora. The proposal launched by the Thunder Bay development and Tourism bureau suggested finances for small business start-up and funding for expanding local capital, according to director Darik Brandt. The Ontario government has a very different vision for our region.

According to the provincial Conservative government, the creation of a zoning process designed to attract international business similar to northern Manitoba and rural Quebec is the “best approach to jobs, growth and investment in the North”.

Bob Pollin, professor of economics at the University of Massachusetts warns of the potential dangers TIZs pose to genuine development. “There are very limited conditions under which Economic Incentive Zoning is viable. In the more typical case, they amount to giveaways to corporations. Even under conditions in which they do mean job creation, you still need to ask, how many jobs per dollar of giveaway, and usually that number is egregiously high.”

Investing businesses will only have to provide five jobs and an infrastructure investment of $100,000 to be eligible for tax exemption in education, employer and capital taxes. If they choose to expand their operations in the future, they can apply for tax deductibles on the initial investment as well.

The province is looking for what they call “value added” businesses to guarantee processing and manufacturing jobs for the region in areas such as civiculture, biotechnology, transportation, mining equipment, pulp and paper, and furniture production.

Tax Incentive Zoning is similar to the recommendations made by Northwestern Ontario’s Association of Chambers of Commerce. “There are certain issues that are unique to the North. It is more expensive to ship things in and out so we need to create a balance; an incentive,” says Mary Long-Irwin, president of the Northwestern Ontario Chamber of
Commerce. “We are creating opportunities for business, particularly from the states because we have a strong dollar and we can provide the incentives that can make us more competitive than the ten other cities looking to attract business.”

Projections for the environmental degradation of the region vary. Long-Irwin points out the acceptance of the Kyoto protocol and the pressure exerted by consumer groups on industry for environmentally conscious production as a protection against unbridled pollution. Dr. Bahran Dadgostar, the dean of Business Administration at Lakehead University
foresees a possibility of decreased environmental quality in bringing industry to Thunder Bay. “Government support has isolated Thunder Bay and we need to find other ways of competing with the millions of dollars put into the (grain) port in Churchill, for example. If we’re attracting power generation dams or mills, obviously there is some environmental cost there”.

Perhaps most importantly, Tax Incentive Zoning will mean massive changes to small business operations in the region as subsidies encourage larger businesses to set up camp in the North. “When large industry comes in, it kills off small businesses, trucking industries in Thunder Bay’s case definitely”, says Dr. Dadgostar. “When big industries come here, there’s what’s called a moon surrounding it made up of secondary industries and service industries that will rise to meet the support needs of those larger industries.” Long-Irwin agrees that small business will play a supporting role to larger industry and she insists that these changes to the business plane will benefit locals through a larger tax base. “The Chamber of Commerce has conferred with small business prior to our recommendations and they recognize that stronger industry means more jobs, more people moving here, and more money staying in our community”.

The region will be locked into this incentive program starting January 1st 2004 over a 10 year commitment.

- Originally Appeared in: The Mill | October 2003