City Cashing in on Development Charge Freeze

The Packet & Times -

Orillia should continue its moratorium on industrial development charges beyond next year, says the operations manager of CCI Thermal Technologies Inc.

"I’m not a big proponent (of) development charges," Bob Hart said Monday. "I think, if they carry on with (the freeze), you get (more) expansions and jobs and tax dollars and all that good stuff with it."

About one year ago, the city put a two-year freeze on industrial development charges.

The temporary measure removes the $109.04-per-square-metre charge facing industries that aim to develop new facilities or expand existing businesses in the city.

To date, CCI Thermal Technologies on Hunter Valley Road and Kubota Metal Corporation (KMC) on Commerce Road have taken advantage of the expansion incentive.

"The move has been extremely successful on the fronts of expanding," said Dan Landry, Orillia’s manager of economic development. "The main goal of economic development for the city is to encourage development and job growth, and those two expansions certainly satisfy both of those criteria."CCI Thermal Technologies is doubling its plant to 100,000 square feet, representing a savings of close to $500,000. The expansion cost about $2.5 million.

Kubota is building a new $12.4-million plant at just under 40,000 square feet. The development charge freeze saved the company about $400,000.

The moratorium was a push for CCI Thermal Technologies' head office to expand, Hart said.

"When we put together our plans for the expansion here and sent it off to our corporate head office, it certainly was — according to them — a large factor in making the decision to go ahead at this time," he said. "The fact that we were able to save those development fees made the whole project much more attractive."

CCI Thermal Technologies also has locations in Oakville, Edmonton, Indiana and Houston.

"The decision on where you do stuff depends on that sort of thing, the cost of doing it in a particular location," Hart said.

The expansion will allow CCI Thermal Technologies to take on larger contracts.

"Initially, we have the contract to build heaters for the streetcars in Toronto as well as the new subway trains," Hart said. "We've picked up some other contracts to build heaters for the transit industry."

Those contracts are going to kick into full production next year.

"The expansion will allow us the room to do it," Hart said.

With additional contracts, CCI Thermal Technologies may be hiring more employees in the future.

"Initially, we won't be adding many more people, but down the road, there's enough room in the expansion to add new business and hopefully then we'll be able to add some more people," Hart said.

Kubota is adding a new product line with its expansion. It will be manufacturing environmentally friendly material used in the production of automotive brake pads.

"They were looking at expanding this product line and there were many places they could put it, including areas where labour costs are lower," Matthew Webb, manager of customer service with Kubota, said. "...obviously (the development charge freeze) was one of the factors to decide where to locate the facility."

Kubota's head office is in Japan.

Asked if it was a major factor in locating in Orillia, Webb responded, "Well, it is a substantial amount of money."

Development charges are collected to cover the costs of municipal infrastructure for future development.

The value of industrial building permits in 2010 was $180,000. The value in 2009 was $1.28 million.

"The community makes that up in not only the tax revenue that will come from the increase of the expansion... (but also) we get the spinoff from the jobs," Landry said.

Coun. Linda Murray, who sits on the economic development committee, said the moratorium could continue past next year.

"...If you can show the second year is more successful or as successful as the first, you'd be looking at extending it," she said.

The moratorium was recommended by Orillia's economic development committee following a business retention and expansion (BRE) survey.

"One of the things that came out of that was nearly half of our businesses were talking about expansion," said Landry.

About 100 Orillia businesses were surveyed.

Of the businesses surveyed, 25 were commercial/retail businesses, including small retail and chain stores, Landry said.

The city is in talks with two more Orillia companies considering expansion.

One company is prepared to expand and is awaiting corporate permission, Landry said.

"They're doing really well and they're looking to corporate for permission and funding for expansion, but it's a corporate decision," he said. "We're looking to work with (both companies) to bring (their expansions) to fruition."

Orillia's success with the development charge moratorium has been noticed.

Municipalities and businesses from outside the city have been contacting Landry.

Orillia is one of a few municipalities offering the freeze.

"The fact that this growth is coming from the industrial sector is also something I think other municipalities are taking note of," Landry said. "While many communities are still experiencing or recovering from contraction in this sector, we seem to be bucking the trend a bit."

This can be contributed to the "strength and resilience" of Orillia's industrial employers, he said.

"The industrial businesses in our community which survived the tougher times did so because they are the best in the world at what they do," Landry said. "Innovation is a way of life for them. And, because they have been innovative, they are in a better position to take advantage of expansion opportunities."

Along with the development charge freeze, Orillia is taking steps to address the development approval process, which businesses say has a lot of "red tape," Landry said.

When Kubota and CCI Thermal Technologies expanded, city departments met with the companies as a group.

The companies laid out their plans and potential problems were discussed upfront, Landry said.

"That's something we're doing more steadfastly and it seems to be working," he said.

A report could be coming to council this fall with more recommendations to speed up the process "Because time is money for developers," Landry said.

Orillia is also looking at what can be done to help retail businesses expand.

"It certainly won't be a moratorium on development charges, but we are looking at some ways that we can encourage some of the potential commercial retail expansion to happen," said Landry.

The city does have a late-payment agreement for retailers, allowing them to pay their development charges over an extended period of time.