Market Development
Encouraging Economic Development in Ontario Communities

In the 2002 Speech from the Throne, the government made a commitment to introduce legislation to create tax-incentive zones to encourage businesses both large and small to invest, relocate and expand in communities. Currently, a consultation process is underway in Ontario as the province works towards the development of a tax incentive zone program. This initiative is promoted jointly by the Ministry of Municipal Affairs and Housing and the Ministry of Finance.

Representatives from OCPA attended a recent consultation meeting in Orangeville: the following article is taken from information presented at that meeting. Although these programs are still in the early stages of development, it is expected that they will present significant opportunities for rural economic development initiatives that could provide direct benefit for Ontario’s corn growers.

The concept of providing tax incentives to encourage the private sector to invest in underdeveloped or economically depressed areas is far from new. Initiated in the UK in the 1970s, such programs have become well entrenched in the U.S., where 41 states have created ‘enterprise zone’ initiatives (tax incentives and other budget measures) geared specifically towards the renewal of designated areas. One such program, the Michigan Renaissance project, was outlined in the October issue of the Ontario Corn Producer.

The provinces of Quebec, PEI and Newfoundland and Labrador all provide packages including significant tax and other incentives to encourage business investment, diversify the economy and stimulate job creation.

The program currently in development for Ontario has similar goals, and is based on the concept of creating partnerships among all levels of government, the private sector and the local community in order to achieve economic development and growth in communities experiencing challenges in attracting investment and jobs. Emphasis is placed on locally developed strategies, entrepreneurship and innovation.

The program will use tax reductions to help stimulate growth within identified communities. A competitive application and selection process to identify six pilot zones is now underway. It is expected that these pilot zones, chosen from 60 applications received by a mid-October deadline, will be announced in the near future. In selecting successful applicants, government will be looking for communities that have developed strategic business plans for sustained economic development, growth and job creation.

It is expected that the tax incentive package offered by the provincial government will be augmented by the local governments of designated zones through added incentives such as property tax relief, start-up assistance, streamlined zoning and planning processes and relief from local fees and charges.

Designated tax incentive zones under the program can be defined in a number of ways: geographic, sectoral, industry-specific, regional, etc. The designation will be time-limited, with the primary objective of giving businesses a reasonable amount of time to become established in the marketplace. Most enterprise zone programs in other jurisdictions operate on timelines of 10-15 years in which tax incentives and other benefits are available to qualifying businesses, with incentives being gradually phased out over the last 3-5 years of the program.

In conjunction with the Tax Incentive Zones project, the Ontario government has also announced the creation of an opportunity bonds program, which would create tax-free bonds to finance investments in local capital projects. Unlike a standard bond, the interest earned by an investor from an opportunity bond would be exempt from taxation. (Opportunity bonds do carry a lower interest rate than standard bonds, however.) When this program is established, the Province will provide tax exemption on interest earned by investors, and has approached the federal government to do the same.

The program will be supported through the creation of the Ontario Municipal Economic Infrastructure Financing Authority (OMEIFA), which will pool resources to help reduce costs to municipalities. OMEIFA will be started with a $1-billion capital infusion. An additional $120 million will be made available through the Ontario Clean Water Agency.

This program is expected to provide assistance for municipalities in financing both infrastructure improvements (water and sewage treatment, waste management, roads and bridges, public transit) and other economic development initiatives.

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