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Cities contracting out development

Tuesday, May 27, 2003 - 00:00

As president of the London Economic Development Corp. (LEDC), John Kime has reason to smile.

Since LEDC was started in this southwestern Ontario city in 1998, it has helped create more than 3,300 new jobs and brought in more than $330-million in investment.

With 125 acres of land sold for industrial development since 2001, London is transforming itself from a centre of education, health care and insurance into a mini-manufacturing magnet for the automotive and other industries.

The reason for London's success in attracting industrial development, Mr. Kime suggests, is a new model that essentially takes the role of economic development out of the hands of politicians and the political process and lets private sector investors deal with a private sector agency.

About 2,000 kilometres away, Halifax has developed a similar private sector model of economic development that it is using to sustain and develop its life sciences, energy, and information technology and communications industries.

In the London model, LEDC operates as an independent, not-for-profit company that has a contract with the city to provide economic development services on its behalf.

LEDC is strictly focused on attracting new investment and jobs to the city and helping existing London businesses grow. It determines the customers' needs, provides detailed information to assist in their investment analysis, and then shows them all available property that meets their needs. It is not involved in the sale of land. The customer purchases the land directly from the owner, whether it be the city, a private owner or a developer.

Mr. Kime says this model eliminates the inherent conflict of interest that can occur if city-run economic development departments attract investors but then show or sell them only land that is owned by the city.

In the past two years, London has significantly increased its industrial manufacturing base by attracting a number of automotive parts companies to build facilities in various parts of the city.

Keiper Canada Ltd., a division of Keiper GmbH and Co. of Germany, built a $100-million plant to assemble seats for DaimlerChrysler vehicles.

Last year, Starlim-Sterner GmbH of Austria purchased 17 acres of land to build a 70,000-square-foot plant to produce silicone parts for the automotive, consumer, electronics, sanitation and health care industries.

Magee Reiter Automotive Systems moved into a 109,000-square-foot facility to supply floor systems to General Motors Corp. and Ford Motor Co.

In January, Copperweld Automotive Group purchased 10 acres of land and is building a 45,000-square-foot plant adjacent to Keiper to make structural frame cross members for the Ford 150 pickup truck.

Since the beginning of this year, LEDC has brought three new automotive companies to Forest City, an industrial park containing 141 acres of city land in the southeast section of the city.

They are Intier Automotive, a division of Magna International Inc., Michigan-based Brose North America, and German parts maker ThyssenKrupp Budd Systems. And LEDC is expecting to make more announcements in the future.

"We are not selling land but providing solutions for our customers," Mr. Kime says. "It's a big help to us because we are not seen to have a conflict by our clients. It's absolutely crucial to our success."

The model, he says, has been difficult to develop because communities "need short-term satisfaction and accountability" while the time horizon for success in economic development is often long. As well, economic development is the biggest challenge municipalities have, and passing responsibility to a private sector group requires a bold step for political leaders, he says.

"Throughout the whole process, LEDC was very supportive," says Uwe Schorpp, general manager of Keiper Canada Ltd., which made the decision to set up in London in December, 2000.

"LEDC was a proven facilitator who helped to quickly get the answers we were looking for and assisted us in dealing effectively with the city."

In Halifax, economic development is the responsibility of the Greater Halifax Partnership. The GHP was created in 1996 as Halifax, Dartmouth, Bedford and Halifax County were being merged into the Halifax Regional Municipality. It was seen as a way to "do economic development differently and take the politics out of it," GHP president Stephen Dempsey says.

The partnership between 120 companies and all three levels of government invests more than $1.3-million each year to keep and expand existing businesses and attract new ones. GHP operates as a separate corporation with 20 directors, three of them representing the municipality. It has a contract with the municipality and is paid for its services.

Half of the organization's revenue comes from private sector investors and half from government. Land is sold to customers either by the municipality or by private owners.

"The business parks build a case for the land, get council to approve it and then preapprove the price so negotiations can be fast-tracked," says Peter Stickings, the municipality's manager of real estate for real property and asset management.

"Customers know exactly what they are going to pay and there's no going back to council for approvals."

The greater Halifax region is home to 12 business and industrial parks with more than 8,000 acres of available space and only 2,300 acres currently occupied.

Under development is a life sciences research village that will bring together researchers, educators, entrepreneurs, government, health professionals, information technology specialists and investors. Two possible sites have been identified. The park is expected to begin with a 100,000-square-foot office building with another three buildings added later.

GHP is also making efforts to attract additional information technology tenants to a number of locations, including Clayton Park West, a commercial and residential area being developed by Fairwyn Developments Ltd., a GHP investor.

Halifax-based systems integration and software engineering firm xwave Solutions Inc. consolidated its several locations in the region into an 82,000-square-foot head office building on the site in 2001. A 53,000-square-foot second building is planned.

Jane Hustins, president of Linx Strategies, a consulting firm that designs and implements organizational strategies, says GHP provides her, as an investor, with a great networking forum for her business. But she says politicians often have trouble accepting that a private sector system can give them accountability without direct control.

"That's tough for municipal politicians to accept," Ms. Hustins says.

Source: Globe and Mail, May 27 2003: "Cities contracting out development" By TALBOT BOGGS, Special to The Globe and Mail. For complete article see Globe and Mail.

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