Mayor Andrew Jakubeit says the Landmark Cinema

Tax incentives under scrutiny

Since Economic Investment Zones were introduced to Penticton, the bylaws have been responsible for more than $34.5 million in construction

In the six years since the concept of Economic Investment Zones were introduced to Penticton, the bylaws have been responsible for more than $34.5 million in construction in the city.

Anthony Haddad, director of development services, said the question of whether some of the big projects would have been built in Penticton without the EIZ is an integral part of the discussion.

“Smaller communities have their challenges in developing,” said Haddad. “We’ve seen some good examples of how the incentive packages have provided property owners with the impetus for moving ahead a little quicker than they may have originally planned.”

More: Council fine tunes economic investment zones

Richard Truscott, Canadian Federation of Independent Business vice-president for B.C. and Alberta, said the concept of luring business with tax incentives is nothing new.

“Governments at all levels have run those kind of programs to encourage businesses to grow and expand,” said Truscott. He thinks the city has their hearts in the right place but also doesn’t blame taxpayers for asking questions about whether the EIZ program should continue in the long term, or whether there is a better approach to promoting economic growth and expansion.

“These tax incentive programs are often fraught with all kinds of unintended consequences and other issues,” said Truscott. “The last thing we want to do is turn entrepreneurs into grant-repreneurs, who are only in business if they get the tax incentives.”

Truscott said tax incentives programs can be a slippery slope, and governments need to have an exit strategy. Penticton renews the economic investment bylaw at intervals, focusing on different areas, but including set entry points and the length of the tax holiday, typically five years.

Mayor Andrew Jakubeit said he thinks the EIZ incentives, in general, are successful.

“I think what staff pointed out at our last council meeting was some incentives worked very well and some perhaps not as planned,” said Jakubeit. As part of the OCP review and update process, he added, the city should modify and refine incentives to target specific areas for growth, whether economic or residential.

Penticton gave up almost $1.1 million in taxes to the 27 projects that qualified for exemptions under the incentive program.

Jakubeit notes most of the tax incentives are for five years and on the improvements only.

“So when you factor in the increased property values and increased taxation values for the life of the building, which is typically 40-plus years, it becomes a significant benefit,” said Jakubeit.

Haddad said the upcoming OCP process is a great opportunity to see where or if the EIZ program should be used to continue targeting strategic growth. So far EIZ-qualified projects account for 300 new jobs, according to Haddad, who cautions there is more to the EIZ concept than strictly financial growth.

“It is shortsighted to look at the bylaw solely through a financial lens. The community and social benefits resulting will serve our community … long after the period of tax exemptions are complete,” said Haddad.

The 2014 version of the EIZ bylaw had components intended to spur different types of development in four areas if the city, including industrial and commercial, but also a Waterfront EIZ along with a Tourism, Sport and Culture EIZ.

“If you look at the Landmark Cinema downtown, it was a rundown building, a brownfield site, and became a catalyst for other development around it: Bad Tattoo Brewery and Pizza; Cannery Brewing; Old Order distillery and TIME Urban Winery, which helped develop a new industry cluster and significantly revitalized downtown, which was a strategic priority of the city,” said Jakubeit.

“That is a good example of the social, economic and environmental benefit of the incentives and not just the financial lens of taxation.”

Jakubeit added that 70 per cent of the incentives went to locals reinvesting in the community, keeping the money in town in terms of both jobs created, but also the amenities or services created.

More: Letter: Infrastructure decisions for Penticton

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