REDAC Regional Market Plan Reflections
10 Saturday Sep 2016
Written by parry034 in Parry Sound, Reflections, Seguin Township
Tags
Archipelago, Carling, economic development, Growth, Infrastructure, McDougall, McKellar, North Star, Opinion, parry sound, Planning, Seguin, Taxes, train
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A few thoughts after reviewing the REDAC Regional Marketing Plan issued June 2016.
Positives:
- The report was not too shy in identifying some of the issues and challenges facing the region in terms of increasing economic development.
- There was a clear understanding that it is one thing to prepare a plan, and another to fund and effectively implement the plan.
- The plan appropriately identified the need for monitoring and assessing the effectiveness of any marketing programs.
Oversights:
Several meaningful issues were overlooked in the report. Was it a case of simply not recognizing the issues, or was it a case of ‘sweeping it under the carpet’. My sense of some important points that were overlooked:
- Services
- Tax differentials
- Housing value
- Railways
Services:
The services available to homeowners and businesses varies considerably throughout the area studied in the REDAC report (Parry Sound, McDougall, Seguin, and Carling). These include:
- Municipal water
- Municipal sewer
- Natural gas
There was mention of the need for better internet connectivity. For the most part it’s not that big an issue except at the residential level. Wireless service is actually quite good, and for businesses it is not an unreasonable expense if it impacts business and profitability. They aren’t streaming video at work. Businesses out in the backwoods of the region really can’t expect ‘fibre’ type service, and if they really needed it they would not be located where they are. Homeowners who want to stream video at home have an issue as wireless can be expensive. Better, actually mostly cheaper, internet services are a nice to have that would help attract people and businesses to the area.
Real businesses that employ people and serve customers on site, not the retired consultant type shop, need water and sewer service. Yes, a well and septic bed can do the job, but it raises an unreasonable burden of effort for businesses that have other things to think about. Think about the new high school to be built in the area. Will they locate somewhere that depends on wells and sewers? Perhaps, but given their preferences they would rather not be doing weekly water tests to make sure the kids aren’t drinking contaminated water following that big rain. And how big a septic bed is needed for a high school of 1,000 students? Right, just about the size of a football or soccer field.
A bigger issue is the availability of natural gas. Electricity is expensive, especially for uses like heating. Natural gas is remarkably inexpensive, but it requires an infrastructure that is only available in Parry Sound and a relatively select number of addresses in the other municipalities. Propane is an option, but it’s not nearly as cheap or convenient as natural gas. I suspect a large number of people who installed electric baseboards when electricity was cheap regret not putting in more insulation, or installing a furnace and ducting that could be used with propane, a heat pump, or natural gas when it arrived along their road.
Tax Differentials:
The tax rates on property in the five municipalities vary about three-fold, with Seguin at the low end and Parry Sound at the top. Taxes reflect a balance of what services municipal residents and business want to receive and how much they are willing to pay for them. The lower taxes in the surrounding regions do not arise from happenstance, they reflect the interests of the taxpayers.
Municipalities like the Town of Parry Sound are stretched in terms of the taxes they can collect and the services they are expected to deliver. Adding new taxable residents and businesses is a priority as much of the infrastructure is already established and any increased revenues from new residents and businesses would be ‘profitable’, and help support necessary infrastructure upgrades for all. Economic development that leads to increased property values is very much in the interests of Parry Sound. The only real revenue the Town has is from the taxation of property and government grants.
The other municipalities do not have the same needs for more development and greater tax revenues. This is reflected in their lower tax rates. Economic development is something that is nice to talk about, because it reflects positively on councils. But do they really want it? Is it possible that more development will lead to a requirement for new services that might mean higher tax rates? Nobody likes to raise property taxes, especially if your municipality depends on being the low tax provider.
I think the residents of these municipalities would rather not promote development. Many of them like it the way it is. Seasonal residents are complaining about the development of certain lakes and are calling for a moratorium on new cottages. And I’m not sure that people really like the idea of losing the small town, or cottage area, feeling that comes with more development. If permanent and seasonal residents can enjoy low taxes and the services of a town like Parry Sound next door or Bracebridge a little further away, why do they need more ‘economic development’? There is no benefit, only the potential for change and higher taxes.
The tax differential between municipalities drives much more than was ever suggested in the REDAC report.
Substandard Housing Value:
This mostly applies to the Town of Parry Sound. Housing in Parry Sound is by Toronto standards cheap; but it is a poor value. There are any number of reasons for this, none of which are easily fixed by politicians. In more affluent regions many of these houses would be leveled and replaced with the types of housing that young families need and can afford. The development of well-designed condo facilities offers some hope for better value housing in Parry Sound, but this type of housing will not appeal to those with families who want a backyard. They can get that type of housing in the Barrie, Orillia and Owen Sound areas, where there are also the jobs to support the associated cost of this housing. Chicken and egg, or egg and chicken?
The Railways:
Again mostly a Parry Sound issue. Canadian National and Canadian Pacific together run about twenty or more heavy freight trains through Parry Sound every day and represent a serious deterrent to business investment and residential development. Not surprisingly, the most substantial recent residential development, Silver Birch, is located far from the railway tracks. Bt it comes at a price, Highway 400 with it’s noisy weekend summer traffic. One development in Parry Sound close to the tracks, and subject to crossings that see trains going both ways, has struggled despite offering attractive ‘Southern Ontario’ single family homes. The issue is not just the risk of a Lac Megantic type event, or even the occasional road blockages, it’s the day-in, day-out, sound of air horns blasting at six crossings and the squeal of the wheels as they round the many curves, day and night. Why build a business in Parry Sound if you can build in Seguin or McDougall? Oh, there’s the issue of services and infrastructure. Why not just go to communities like Orillia, Barrie and the ‘suburban’ areas of Muskoka, where you are not subject to trains in the same manner and you have access to more customers (retail and service), cheaper transport costs (manufacturing), and a larger employment pool?
Parry Sound Bay and Beyond can become an attractive destination for both people and businesses. The trouble is that there are too many other Southern Ontario municipalities that are already much more attractive. Once these destinations reach their limit to host businesses and new homes people will begin to look at Parry Sound Bay and Beyond. That is unless we can get our act together, work together, and create the infrastructure to compete. But area municipalities, with the exception of Parry Sound have more than enough money to continue operating as they have for the last twenty years, for another twenty years, without attracting any new residents or businesses. These municipalities have little motivation to do anything new. They just need to pretend to be interested lest permanent residents and businesses think they don’t play nicely with others.
Provincial and Federal civil servants are quite happy to facilitate and fund discussions of economic development in the West Parry Sound area. It their job to do it. And they are well paid jobs. By gosh they will do their best to get it done, regardless of the odds. It reminds me of the continuous negotiations in the Middle East between the Israelis and the Palestinians facilitated by the United States. The US State Department is tasked with getting a real agreement between these two parties and they try their best. It’s their job, even though there is no prospect of any type of agreement. At this point Israel has everything it needs in the region. It has the wealth, military strength and political influence to ensure nothing is taken from them. It is not in their interest to negotiate. Any appearance of willingness to negotiate is strictly a function of making nice with the President of the United States who gets it in their mind every now and then that they want to gain statesman status by brokering a grand peace agreement.
Final Thoughts
I started out this review of the REDAC Regional Marketing Plan expecting to be critical of Whitestone, McKellar and The Archipelago for not participating in the REDAC economic development process. Looking at things a little more closely I have come to realize that they are perhaps the only honest brokers in the region, willing to admit that not only do they not need regional cooperation, they are actually better off without it. I will give a pass also to the Town of Parry Sound. I believe they do support regional economic development because they desperately need the increased tax base to manage tax rates and support additional infrastructure necessary for the larger community.
Even Parry Sound tax rates are on the low end for Northern Ontario as was presented in a survey of Northern Ontario municipalities. I visited Elliot Lake in August and was impressed by the upkeep of the town and the facilities it offers. But it benefits from a population base about twice that of Parry Sound, a much larger geographic area (715 sq. km, versus 13 sq. km), and a tax rate 40% higher.
Regional economic development is something to keep Municipal, Provincial and Federal employees busy, and employed. If Ontario and Canada really want to see additional economic development in the area they need to provide incentives to McDougall and Seguin to hand over enough land to Parry Sound to allow for real economic development, by a municipality that is interested in economic development, and with established infrastructure. Incentives to McDougall and Seguin might include support for policing expenses, and/or broadband infrastructure, and/or an area athletic complex. But that would be a bribe I suppose. Given America’s experience with the billions they have pumped into the Middle East, I expect it wouldn’t work too well here. Take the money and run.
Aside: reading yesterday’s Beacon Star I saw that Seguin has started thinking about their 2017 budget. Their high priority items are summer weekend support for a nursing station in Rosseau, taking responsibility for unassumed roads, and a tennis court. All this with a potential 0% increase in taxes. Seguin is doing just fine with their current business model. Why take on development that might mean responsibility for building the services accompanying business and non-seasonal resident growth? It might mean tax increases and unfamiliar faces. That’s okay, the area municipalities have their cake and are able to eat it as well. They seem to be riding as high on property values as were the Middle East oil kingdoms were when oil was $100 a barrel. As long as property valuation stay high, and seasonal residents don’t become permanent residents and expect Toronto level services, it’s all okay.
Mismatched Objectives, Taking Off and Heading to Port.
(Best to just get out of each other’s way.)
Update: tracking down a link for the Beacon Star article I came across a squabble between Carling and the The Archipelago about phone bills. Yup, sure, let’s invest more in regional cooperation. (Not!) The Town of Parry Sound needs to take on a Singapore or Hong Kong frame of mind. Small is beautiful. It may not be cheap but it offers great value. Can we erect borders?
No comments
September 11, 2016 at 9:23 am
I haven’t done a count, but I bet that if you drove through parry sound – down bowes, loop through the downtown, then out joseph – and counted the number of current businesses versus the number of vacant business zoned buildings, the ratio would be approaching 1:1. My point, Parry Sound may not be getting any new land for business development, but they’re hardly using all the land they have. If a business wanted to locate in parry sound, it would have its choice of many locations.
The high vacancy rate should be taken as a message that, despite the attractiveness of water, sewer and highspeed internet, something about parry sound is keeping businesses away. Now what could that be? Hint: it’s not death…
September 11, 2016 at 12:48 pm
Choo-choo! And Ryan your count would be wayyyy off. It’s more like 10:1 or even 30:1.
September 14, 2016 at 8:58 am
Really? You think noisy trains are more of an impediment to business in parry sound than the taxes?
The trains are merely annoying. I’m a small business owner, and I promise you, while i’m annoyed by things that are annoying, I only really care about the things that take my money.
You argue that the tax rate in parry sound is good, comparable to other towns. But since when is “what other towns are doing” the measure of what is good? I thought only town staff used that metric?
To my mind, the proof is in the pudding: if you’re selling something that people need, but no one is buying, then your price is probably too high. That’s just basic economics. Parry sound is, essentially, selling business space. But not enough people are buying. Even if my ratio is off 10:1, there’s still a tonne of vacant businesses in ps: not enough people are buying. I think that shows then that their price, i.e. taxes, are just too high for this town (regardless of what other towns are doing).
Also, consider that plenty of towns have trains, and plenty of them still have plenty of business. So many local economies do just fine with trains, but how many can survive excessive taxation? Not many, only a few exceptional places where the location can justify it, e.g. NY city.
September 14, 2016 at 1:19 pm
Ryan:
Your argument is not unlike those that argue that any increase in the minimum hourly wage would ruin their business. More knowledgeable people than I have responded that if your business depends on employees earning the lowest minimum wage then you don’t have a viable business model.
So in the same light let’s consider your tax rate argument as it applies to business. A real business, not a boutique that depends on weekend markets, or the owner having a full-time or part-time job with a ‘real company’.
If a business is a smaller two- or three-person operation, let’s say a retail storefront or print shop, it probably requires about a 1,000 sq. ft. workspace, possibly more or possibly less. That building can be bought in Parry Sound for $400,000 or less. That’s probably bigger than needed, and it probably has an upstairs apartment that can be rented out, but let’s forget about that additional revenue. Taxes would be about $6,000 per year, add in another $500 for the Downtown Business Association if it’s in that area. That same $400,000 building would be taxed at about $1,600 per year in Seguin, and in McDougall or Carling for about $2,400.
The difference is about $4,000 per year. I suggest that if $4,000 is a make or break cost then the business really isn’t viable. It needs to rethink its business model. Now, that might not be the case for a small startup where it’s a husband and wife team who have outside jobs and probably live onsite. But that really isn’t a business in that it employs people, creating jobs and buying services and goods locally.
And for the $4,000 extra in Parry Sound you get customer traffic and a central location. How many print shops that depend on local business want to be up in McKellar, or Humphrey? Does a car dealer with an important auto service business want to be shuttling service clients back and forth from Waubamik to Carling, or Nobel or Parry Sound? Does that Pointe-au-Baril print shop want to compete with a business in Parry Sound where people can drop off, or pick up, a job as they do their banking or drop by the grocery store? The $4,000 Parry Sound premium is a bargain for a business that is properly executing a viable business model.
I run the type of consulting practice that could benefit from the lower taxes of operating in the ‘burbs’. I have no walk-in business. All I need is a good computer system, reliable electrical service, and dependable telecommunications, phone and internet. Having a bank, post office, retail stores, accountant, health and dental services within a 1 km radius is a bonus. I don’t spend too much of my time driving around, I can actually walk or cycle in many cases. And if my kids were in elementary or high school they wouldn’t be wasting the time I did on a school bus. My business doesn’t depend on saving $4,000 by locating to the ‘burbs’ to be acceptable profitable.
Many businesses recognize the value proposition of Parry Sound but want the lower taxes of Seguin, and hate the burden of the trains. They move ‘just beyond the fringe’, down Oastler Drive (Old Hwy 69). Parry Sound services and Seguin taxes; ‘priceless’. (Growing up on a farm outside Ottawa in the 60’s there was a car dealer located in Stittsville, about 25 km from Ottawa, that advertised on the radio their lower out-of-town prices ‘’just beyond the fringe”. The same cars but the suggestion that they would be cheaper, although warranty service would be a little further away. They spent quite a bit on advertising if I can still remember it five decades later.)
There is a place for the Wal-Mart and Dollarama operations that promise lower prices. And there are communities that prosper on the basis of lower taxes, be it property taxes as it is with the Parry Sound ‘burbs’, or Florida and its no state tax offering, or the Caymans. I have no argument or complaint with the Parry Sound ‘burbs’. They have a business model that works for them. A small business, or boutique, that depends on a $4,000 difference in property tax prices to make a go of it really has really has much bigger challenges than Parry Sound property taxes. But lower taxes do help.
Your argument would suggest that Sobeys and White Squall are hampered because their prices are higher than Wal-Mart and Dollorama. They seem to be doing okay, despite their higher prices. Shouldn’t White Squall just move all of their operation to the low tax haven of their Carling lakeside facility? They would save thousands on taxes and much more on no longer operating a second facility. Oh, there is the small issue of customer traffic.
My post suggested that Parry Sound has a completely different business model then the ‘burbs’, offering a different value proposition, with different costs. My conclusion is that there really isn’t much reason for investing in regional cooperation given the differing business objectives driven largely by property tax and services strategies. Let’s all focus on what we individually do well and try to do it even better.
About trains. I suspect that 80% of businesses in Parry Sound within 200 metres of a train track would accept a 25% increase in their property taxes if the trains would magically disappear and the rail beds turned into walking paths. This could be a charming little town, no bombs rolling overhead day and night. Expensive by your standards, but a bargain for those who price out other destinations, for business or pleasure. New York City, Tokyo, London, Hong Kong and Singapore are obscenely expensive by all benchmarks, yet seem to deliver value based on business interest in locating there. And they don’t have trains running through the downtown day and night. Nor does Bracebridge, or Huntsville or Gravenhurst.
September 14, 2016 at 8:58 pm
If I accept your numbers – which I’d probably be prepared to do; they sound reasonable – then sure, $4k doesn’t sound like a lot.
Or is it? Many of these small businesses simply do operate with small margins, especially since, given the nature of parry sound’s primary “industry” as tourism, many have to make the bulk of their year’s income in a few short summer months. A $4k hit is not at all unsubstantial, and I suspect may be the straw that breaks the camel’s back for a lot of businesses.
Consider the mad-hatter: that seemed like a great little business. Great location, nice vibe to it, and in the downtown only had to compete with the country gourmet, which was far enough away and catered to a different enough style of clientele that I suspect the competition really wasn’t that intense. You’d think that the mad hatter would have been almost a license to print money (esp. since, as last week’s news explained, canadians have one of the highest per capita coffee consumption rates, and the highest per capita “outside purchased” coffee rates, as opposed to home brew), and yet the owner ended up having to shut it down and take a job at the home depot. Let’s be clear there: working at home depot is apparently more lucrative than running a downtown coffee shop. Could $4k make a difference in that equation? I bet it would.
Either way, I think the proof is still in the simple fact that the businesses just aren’t here; so many business people have spoken with their feet.
I can’t imagine the average business owner being willing to accept a 25% tax increase for *any reason*, let alone something as irrelevant to their actual business as the annoyance of trains. And trust me – I *HATE* the trains.
September 15, 2016 at 9:59 am
I don’t have any knowledge of the Mad Hatter decision, but I doubt $4K would have made a difference. And they were renters, if that matters.
I think they probably just burnt out. My family were in the restaurant business and I know from first hand experience watching my parents that it is brutal. The hours are long. The expectations are high; you are always on. There are numerous regulations that need to be met. And staffing is the big problem. If you are small enough to staff it mostly with family, you never get a vacation. You can’t really afford to pay staff enough for them to make a career of it, so there is regular turnover. Brutal, brutal, brutal, until you get to the stage where you can hire a manager. But very few businesses get to that stage. And those that do don’t last that long, because the owner really needs to be there, if not to work, to greet and keep an eye on quality.
The businesses may not be here because we really don’t have a year round population to support them. And don’t underestimate the impact of online ordering from high quality vendors. You have noticed that the grocery stores seem to be doing okay, but it is the small appliance, electronics, clothing and similar stores that seem to be suffering. Between Wal-Mart and Amazon, it’s tough to compete. And then there are the low car dealers in Barrie or Sudbury or North Bay for our local car dealers to deal with. Forty years ago you had Ford, GM, Chrysler, VW and the emerging imports (Toyota and Honda). It’s not easy being a Ford or GM dealer if you are selling cars. You need to depend on selling the benefit of local service. Local, not in Waubamik, or Pointe-au-Baril or Humphrey or Whitestone. They have it a little bit better with trucks, which I suspect is what keeps our local dealerships afloat. Businesses can’t afford to drive to Barrie to get a problem fixed. Time is money.
Trains are not just annoying, they drive away business. Ask some of the downtown accommodation providers how they feel about the trains. Have you heard the rumble in the Town Office during Town Council meetings when one of the them roll by? The CN line rolls behind our property, so I know how loud it can get up close and personal. The CP line is 1 km away and I still hear the rumble as it rolls over the trestle. There is lots of stuff I ‘don’t get’ but i don’t discount the opinions or feelings of other who do ‘get it’, or ‘feel it’. You might not be bothered by trains, but i have met others who don’t live in Parry Sound just for that reason. The low taxes are just a bonus.