The Regional Municipality of Halton

[Pages:9]The Regional Municipality of Halton

Report To:

Chair and Members of the Administration and Finance Committee

From:

Mark G. Meneray, Commissioner, Legislative & Planning Services and Corporate Counsel

Date:

July 8, 2015

Report No. - Re: LPS78-15 - Economic Development - 2015 Funding of the Greater Toronto Marketing Alliance and Update on a New Foreign Direct Investment Agency for the Greater Toronto Area

RECOMMENDATION

1. THAT The Regional Municipality of Halton enter into a Services Agreement to provide funding in the amount of $100,000 to the Greater Toronto Marketing Alliance for international marketing services in 2015 as outlined in Report No. LPS78-15 re. "2015 Funding of the Greater Toronto Marketing Alliance and Update on a New Foreign Direct Investment Agency for the Greater Toronto Area".

2. THAT the Director of Legal Services be authorized to prepare a by-law for the Services Agreement as set out in Recommendation No. 1, and that the Regional Chair and Clerk be authorized to execute the Services Agreement and all ancillary documents upon the passage of a by-law for that purpose.

REPORT

Executive Summary

? The Greater Toronto Marketing Alliance (GTMA) is a public-private partnership founded in 1998 that promotes the Greater Toronto Area as a location of choice for foreign direct investment (FDI).

? The GTMA's core international marketing services are principally funded by the five regions of the GTA (Toronto, Halton, York, Durham, Peel local municipalities) through a common Services Agreement.

? This report recommends that Halton Region enter into a 2015 Services Agreement with the GTMA so that it may continue to deliver its FDI attraction program this year.

? This report updates Council on the efforts underway to develop a new model for attracting foreign investment into the GTA. The report notes that there is an opportunity to establish a new FDI agency that would provide the Toronto Region with new marketing, lead generation and deal closing capabilities.

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? Efforts are underway to launch this new FDI agency, which would replace the GTMA, in January 2016.

? The new FDI agency is predicated on increased funding from senior levels of government and the five regions of the GTA. Halton Region's annual contribution is expected to increase from the current $100,000 commitment to the GTMA to approximately $160,000 per year for the new FDI agency starting in 2016.

Background

Foreign direct investment is an important element of a metropolitan economy. A recent study by the Washington D.C.-based Brookings Institution concludes that foreign investment contributes significantly to and in some cases drives industry specialization in some of the United States' highest performing metropolitan economies. Much earlier studies have determined that FDI provides the host community with higher than average paying jobs and leads to increases in trade, local research and development spending and even productivity.

For these reasons, the municipalities of the GTA came together in 1997 to form the Greater Toronto Marketing Alliance. The GTMA was incorporated as a not-for-profit corporation and structured as a public-private partnership for the purpose of attracting FDI into the Toronto Region.

The GTMA was founded on the understanding that the GTA's FDI attraction efforts should fall under a "Toronto" brand which has the region's strongest international brand recognition. Further, the GTMA's municipal founders endorsed the principle that a new foreign investment that lands in the Toronto Region is a win for all GTA municipalities ? so while only one region in the GTA may see a direct tax assessment benefit from this foreign investment, other parts of the Toronto Region could benefit from the new jobs that are created.

The GTMA's core international marketing services are principally funded by the five regions of the GTA (Toronto, Halton, York, Durham and the Peel local municipalities of Mississauga, Brampton and Caledon) as shown below. Senior levels of government currently provide program specific funding to the GTMA as do private sector sponsors.

Halton Region Durham Region York Region City of Toronto (Invest Toronto) Peel - City of Mississauga Peel - City of Brampton Peel - Town of Caledon

$ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 56,250 $ 37,500 $ 6,250

Total Annual Municipal Contribution

$ 500,000

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In 2009, the five regions of the GTA (also known as the municipal funding partners) negotiated a common Services Agreement with the GTMA in order to better clarify the deliverables, the roles and responsibilities and the reporting from the GTMA. This Services Agreement is reviewed by the municipal funding partners on an annual basis.

Halton Region customarily reviews its annual Services Agreement with the GTMA each fall by bringing forward a report for the consideration of Regional Council. However, with the municipal election in October 2014 and the fact that representatives of the five regions in the GTA and senior levels of government have been involved in a major initiative to develop a new approach to FDI attraction in the Toronto Region, it was agreed that the consideration of municipal funding of the GTMA organization for 2015 would take place in-year.

Discussion

In November 2014, the GTMA's municipal funding partners met with the GTMA to discuss the organization's annual program for FDI attraction. The GTMA's 2015 FDI program, which features an ongoing approach for key markets such as the U.S., Germany, Netherlands and Brazil, was approved by the municipal funding partners. The GTMA was subsequently successful in securing provincial funding for elements of its 2015 FDI program from the Ministry of Agriculture, Food and Rural Affairs and through the federal government's Invest Canada ? Community Initiatives program.

All of the GTMA's municipal funding partners have agreed to provide their 2015 municipal funding contributions to the GTMA and have either already committed their funds through their respective municipal processes or will be moving forward shortly.

The GTMA's 2015 FDI attraction program is in accordance with the deliverables established in the Services Agreement. Notwithstanding the considerable efforts that are underway to establish a new FDI agency for the Toronto Region in early 2016, the GTMA has been active in the international market over the first two quarters and has a fulsome FDI program which will take it to the end of the year.

Accordingly, this report recommends that Halton Region enter into a 2015 Services Agreement with the GTMA in the amount of $100,000 and that the Director of Legal Services be authorized to prepare a by-law for the Services Agreement and that the Regional Chair and Clerk be authorized to execute the Services Agreement and all ancillary documents upon the passage of a by-law for that purpose.

Update on a New Foreign Direct Investment Agency for the Greater Toronto Area

Over the past several years, issues have been raised by the GTMA Board of Directors, the GTMA's municipal funding partners, senior levels of government and other stakeholders regarding the limited success of the GTMA and the coordination of FDI activities in the GTA. Concerns have been raised regarding the total number of foreign

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investments and jobs created, unequal results regarding foreign investment deals across the GTA, a perceived lack of coordination of Toronto Region FDI activities and the ongoing limited resourcing of the GTMA organization which has hampered its overall effectiveness.

Certain measures such as the establishment of a common Services Agreement between the GTMA and its municipal funding partners in 2009 helped to better clarify the GTMA's annual deliverables and its reporting responsibilities to the GTA municipalities. But other developments such as the establishment of Invest Toronto in 2009, a new FDI agency for the City of Toronto heightened concerns over the coordination of FDI activities in the Toronto Region.

In an effort to address these issues, the GTMA Board of Directors in late 2012 commissioned PwC to undertake a consulting study entitled "Greater Toronto Marketing Alliance Roadmap to Revitalization". All of the five regions in the GTA, including Halton Region were directly engaged in the study, through representation on the study's strategy group as well as participation in stakeholder consultations.

The PwC report reviewed the GTMA's performance relative to leading FDI attraction agencies in Montreal, London (UK), Charlotte and Miami. The report concluded that the GTMA was underperforming relative to these organizations and brought forward fourteen recommendations related to the funding, structure, roles and responsibilities of the GTMA in order to improve its performance. The report recommended a significant increase in the funding and scale of the organization which would include signature investments from senior levels of government and augmented funding from the five regions of the GTA.

At its meeting of June 24, 2013, the GTMA Board of Directors approved the fourteen recommendations of the PwC report and began an advocacy campaign to garner the interest and support of senior levels of government for a revitalized GTMA organization. On October 22, 2014 the Hon. Brad Duguid, Minister of Economic Development, Employment & Infrastructure (MEDEI) publicly announced the Ontario government's intention to fund the GTMA.

The GTMA Board established a Transition Committee in December 2014 comprised of representatives from the GTMA Board, the provincial government, GTA municipal funding partners (including Halton Region) and the private sector to drive forward on the key recommendations of the PwC report. One of the important directions that the Transition Committee has recommended and which the GTMA Board subsequently approved is the shift in focus from a more narrow revitalization of the GTMA organization itself to the establishment of a new FDI agency which would replace the GTMA in January 2016. It was seen that this latter approach had the immediate support of the provincial level of government and that a new FDI agency would better allow for a refreshed approach to FDI attraction in the Toronto Region.

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At the GTMA's Annual General meeting on May 13, 2015, it was noted that the GTMA would be closing its doors at the end of 2015. It was also announced that "with funding support from Regional, Provincial and Federal governments, a new agency will be born to serve the Greater Toronto Area and that this new agency will increase our capacity and capabilities to attract business from across the globe to the Toronto Region."

There has been considerable progress in the establishment of the new FDI agency for the target date of January 2016. Under the direction of the Transition Committee, the incorporation of the new FDI agency as a non-profit corporation is expected to be complete by early July. The by-laws for the new organization have been completed and the first meeting of the FDI agency's interim board of directors takes place on June 29, 2015. The interim board is comprised of City of Pickering Mayor Dave Ryan, City of Toronto Mayor John Tory, City of Mississauga Mayor Bonnie Crombie, York Region Chairman and CEO Wayne Emmerson, Ministry of Economic Development Assistant Deputy Minister Tony LaMantia, Pat Horgan, Vice President, IBM Canada and Janet Ecker, President, Toronto Financial Services Alliance.

Reporting to the Transition Committee is an Economic Development Office working group comprised of the economic development staff from the five regions of the GTA - Halton, York and Durham Region, Toronto and the Peel Municipalities of Mississauga, Brampton and Caledon all of whom currently fund the GTMA organization. The EDO working group has been meeting on a bi-weekly basis since May and is focusing its efforts on the operational aspects of the new FDI agency as well as the key roles and responsibilities of the new entity relative to the municipalities of the five GTA regions. The EDO working group will be bringing forward its recommendations to the Transition Committee in September 2015.

An important development in the establishment of the new FDI agency for the GTA concerns Invest Toronto, the City of Toronto's own investment attraction organization. With this agency employing the Toronto brand internationally it has given rise to the perceptual issue that the Toronto Region has two dedicated FDI agencies, the GTMA and Invest Toronto.

It has been generally acknowledged in the various discussions concerning the new FDI agency that there would need to be some sort of melding of the GTMA and Invest Toronto to create one entity for FDI attraction in the GTA. A key transitional element for the new agency is the orderly transfer of client flow and expertise from the two FDI organizations while still ensuring that the organization is GTA wide in knowledge and scope. Representatives from the City of Toronto and Invest Toronto are involved in the EDO working group and on the Transition Committee. The City of Toronto will be reporting on its participation in the new FDI agency, including impacts on Invest Toronto and the City's Economic Development and Culture Division in September 2015. It is generally understood that the staff direction is for the City of Toronto to fully participate in the new FDI agency.

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The work of the Transition Committee and the various public sector stakeholders is driving change in the way that FDI attraction activities in the GTA are structured, funded and focused. The provincial government has committed to providing early transition funding to the new FDI agency upon its incorporation in July 2015 in order to achieve the target start date of January 2016.

Implications of the New GTA FDI Agency for Halton and the GTA Municipalities

One of the findings of the PwC report is that in order for an FDI agency to be successful it needs to have sufficient scale and a strong financial foundation. In this regard, the GTMA was seen to be under-financed relative to its peers in Montreal, London, Charlotte and Miami.

The PwC report outlined a funding proposal which would see the funding of a GTA FDI agency increase from the GTMA's annual budget of approximately $1.5 million to a budget of $7.5 million. The main components of this $6 million increase would come in the form of $2.5 million each from the provincial and federal governments. The report also recommended that the GTA municipal funding increase from the current $500,000 in annual funding to $2.0 million annually. The final $500,000 was then expected to come from the private sector.

It was suggested in the PwC report that the GTA municipal funding shares would be determined on a per capita basis. For Halton Region, the annual contribution would increase from the current $100,000 (for the GTMA) to just over $160,000 (for the new FDI agency). Table 1 details the potential funding impact on the GTA municipal funders.

Table 1 Municipal Funding of the GTMA in 2015 And the New FDI Agency for the GTA in 2016

GTA Municipal Funders (note Peel Region itself is not a funder)

Durham Region (on behalf of 8 local municipalities) Halton Region (on behalf of 4 local municipalities) York Region (on behalf of 9 municipalities)

City of Toronto

Current 2015 GTMA

Funding

% Share Total GTA Municipal Funding

$100,000 20%

$100,000 20%

$100,000 20% $100,000 20%

2016 Augmented Funding of New FDI Agency

% Increase

% Share Total GTA Municipal Funding

$206,397 106%

10%

$160,039 60%

8%

$329,389 229%

16%

$890,412 790%

45%

City of Mississauga (Peel)

$56,250 11%

$227,598 305%

11%

City of Brampton (Peel)

$37,500 8%

$167,135 346%

8%

Town of Caledon (Peel)

$6,250 1%

$19,030 204%

1%

GTA Municipal Total $500,000 100%

$2,000,000 300%

100%

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Staff will identify the expected $60,000 increase in Halton Region funding in 2016 for the new FDI agency in the 2016 Budget Directions report. Staff will also prepare a Strategic Investment Form pertaining to this increase for Regional Council's consideration in the 2016 Budget this fall.

While the increase in funding in 2016 is the principal implication of the new FDI agency for Halton Region, one potential area of impact is the expected increase in investment leads generated by the new FDI agency and how it could affect Halton Region and Halton municipalities in terms of lead servicing. None of these municipal organizations is resourced to handle a higher volume of leads and especially if the nature of leads involves joint ventures, strategic alliances or other business to business arrangements which are common methods for foreign companies entering into new markets. Accordingly, the EDO working group has been suggesting that the new FDI agency take on a stronger client servicing role ? one that would have it continue to engage with the foreign investor all the way through to an investment. This is the approach that is employed by Montreal International, Montreal's dedicated FDI agency.

Another element of the Montreal model that is now under discussion among the EDO working group and the Transition Committee is a more tightly scripted coordination of the various Toronto Region investment missions, delegations and international outreach activities. In the Montreal model, it is Montreal International that is solely responsible for leading such international FDI activities. Having the new Toronto Region FDI agency take on a leadership approach and coordinate the GTA's international investment activities under a Toronto brand would improve the perception and ultimately the reality that the GTA is working together to compete for global investment.

It is worth noting that Investment Attraction and Retention is one of five pillars of Halton Region's ten year Economic Development Strategy 2012-2021. This pillar speaks to the ongoing interest and involvement that Halton Region has in attracting new business investment and jobs to Halton. Unlike a pure-play FDI agency, it is less important to Halton Region that this investment comes from outside of Canada. In reality, the majority of established new businesses locating to Halton originate from elsewhere in the GTA.

Halton Region's efforts in investment attraction under the Economic Development Strategy have focused on building a strong target sector proposition for companies that focus on talent and innovation. A recent study undertaken by Halton Region in consultation with the Halton local municipalities identified Engineering, Financial Services and Information Communications Technology as Halton's target sectors for investment attraction and further cluster support.

The Region's 2012-2021 Economic Development Strategy also contains a focus on investment influencers such as the GTA industrial and commercial real estate and development community and international site selectors. Halton Region continues to be active working with its municipal partners in order to provide timely responses to new non-residential investment inquiries and applications. Halton Region's internal Planning, Public Works and Finance steering committee is the Region's informal investment

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response team which works to resolve issues associated with major non-residential projects or inquiries should they arise.

Unlike some of the GTA municipalities which have developed their own municipal FDI programs and are active internationally, in addition to their funding of the GTMA, Halton Region has taken a selective and limited role in terms of actual international activities. Halton Region has participated in a handful of GTMA missions over the past five years, primarily to better understand international clients' perception and awareness of the Canadian market and how well the GTA sales pitch is received.

In December 2014, Halton Region worked with the GTMA to deliver an investment attraction webinar targeted to site selectors and other real estate intermediaries in Canada and the U.S. This pilot project was a useful and cost effective way of reaching out to clients beyond the GTA and similar efforts will be undertaken by Halton Region this fall. Halton Region will also leverage social media to connect with both national and international clients and intermediaries. It is envisaged that these activities will complement rather than compete with the international activities undertaken by the new FDI agency for the GTA.

In the main, there is value in the GTA municipalities and senior levels of government coming together to invest in a new FDI agency for the Toronto Region. The current model has been under-resourced for a region of the size and importance as the GTA. There is an opportunity with senior levels of government looking to commit significant multi-year funding to the new organization which will give it capabilities and resources that are unmatched by any municipal entity in the Toronto Region.

While the new FDI agency is expected to increase Halton Region's annual funding commitment starting in 2016, the Region's funding increase is the lowest among all GTA municipal funding partners and the Region's share of total GTA municipal funding for FDI will drop from the current 20% for the GTMA to 8% for the new FDI agency. The new FDI agency is not expected to present any major negative coordination issues for Halton Region or the Halton municipalities in so far as none of these Halton municipal organizations operate their own discrete FDI programs. Halton Region will continue to advocate that the new FDI agency take on a complete client servicing model and will monitor lead servicing impacts and other considerations once the new FDI agency is operational in early 2016.

Finally, having a singular FDI agency for the GTA operating with an internationally recognized "Toronto" brand represents the best opportunity to usher in a new era of Toronto Region cooperation and coordination and to achieve meaningful results in attracting foreign investment to the GTA and the creation of new jobs.

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