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HomeMy WebLinkAboutCAO-001-08 Cl~mgron REPORT CHIEF ADMINISTRATIVE OFFICER Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE K CSo\ '^ \-10 n +q PA - Oc~ 1-00 Date: January 18, 2008 Report #: CAO-O 1-08 File: By-law #: Subject: ECONOMIC DEVELOPMENT SERVICE DELIVERY Recommendations 1. That Report CAO-01-08 be received, 2. That the Committee recommends to council one of the following options: a) That the Mayor and the Clerk be authorized to execute an agreement with the Clarington Board of Trade for the provision of economic development seNices for year 2008-2010 inclusive subject to the terms contained in Section 5.4 of this Report. OR b) That the Clarington Board of Trade be advised that the Municipality will no longer wish to outsource economic development seNices, but would provide the Board an annual unconditional subsidies in the amount of $20,000, and further the CAO be directed to prepare a transition plan and budget proposal to resume economic development seNices in-house including the scenarios of having a full fledge Economic Development Office or taking a limited approach of hiring a business facilitator. O~~~ Submitted by: Franklin Wu Chief Administrative Officer CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L 1C 3A6 T (905)623-3379 F (905)623-5717 REPORT NO.: CAO-01-08 PAGE 2 1. Purpose The purpose of this report is: 1.1 To provide background information pertaining to economic development service delivery undertaken by the Clarington Board of Trade; 1.2 To review economic development service delivery options; and 1.3 To discuss the pros and cons for each option. 2. History In order to assist Council's understanding and deliberation of the subject matter, a brief history of economic development service may be helpful. 2.1 From 1974 to 1994 In the early years of the then amalgamated Town of Newcastle, economic development service was undertaken on an ad hoc basis by the CAO with assistance from the Planning and Development Department. Over the years, the Planning and Development Department has assumed additional responsibilities in economic development although this function was never officially recognized as a service function of the department. With no additional staff resources to do the job, economic development works suffered and the Department's commitment and effectiveness came into question. Understandably, the Department focus is on planning and growth management as necessitated by the onslaught on unprecedented urban growth. 2.2 From 1994-1998 The need for change was imminent. In 1994, Council approved the recommendation of the CAO to create an Economic Development Office directly reporting to the CAO. The Economic Development Office was staffed by an Economic Development Officer (EDO) and an administrative assistant. This arrangement continued until the departure of the EDO and this created an opportunity to review economic development service delivery. 2.3 From 1998 In the mid 90s, local businesses had expressed concerns that the economic development has not been effectively delivered by municipal staff. In response, the Mayor established an Economic Development Task Force which subsequently made a series of recommendations to the Municipality with respect REPORT NO.: CAO-01-08 PAGE 3 to various ways to improve economic development service. One of the cornerstone recommendations was premised on the principle that there is no better way to promote business than by existing businesses. Shortly after delivering its recommendations to council, members of the Task Force established the Clarington Board of Trade and offered to undertake economic development service for the Municipality. Council accepted the offer and the result was a three year contract entered into between the Municipality and the Clarington Board of Trade. The contract has since been extended and the current contract ends on December 31, 2007. The fees for service have increased over the years from $35,000 in 1998 to $100,000 in 2007. The fee is intended to cover the salary/benefits of the Business Development Manager plus associated operating expenses. 3. Synopsis of current agreement The agreement was first entered into in 1998, and has had a couple minor amendments since. The core agreement requires the Board of Trade to deliver economic development service under the broad umbrella of business retention and business attraction. Specific economic development activities are not defined in order to allow the Board to exercise f1exibilities so long the works fall within the meaning and intent of business attractionlretention. The Board staff operates out of the Liberty Street Tourism Office provided by the Municipality. For the purpose of keeping connected with the municipal administration, the Board has an open invitation for the CAO to attend its monthly Board meeting. In addition, the Board has made regular presentation and update on economic development activities to council. 4. Service delivery and performance evaluation Since assuming the responsibility of economic development in 1998, the Board of Trade has slowly evolved into an umbrella organization of all local business groups and associations. Working in concert with these business organizations within Clarington, the Board has taken on many economic development and promotional activities, spoken on behalf of all businesses in Clarington and worked closely with municipal staff to facilitate new businesses to establish in Clarington. Over the years, through the works of the Business Manager, the Board has established its presence within the GT A economic development community. Working closely with past and present business development managers, the CAO has the opportunity to observe the performance of the individuals who hold this position, and is pleased to advise that these individuals have done a very REPORT NO.: CAO-01-08 PAGE 4 competent job. Council members, past and present, also have the opportunity to observe and evaluate the effectiveness of the Board and can draw their respective conclusions. In the consideration of future direction in the delivery of economic development service, council should be guided by carefully considering the following questions. Did the Board live up to Council's expectation? Did the Board communicate well with council members? Did the Municipality receive value for the money? What are other available options and what are the pros and cons for these options? 5. Options for economic development service delivery The Municipal Act has granted economic development function to the Region of Durham with the proviso that the Region may allow local municipalities to perform such function simultaneously. In 2003, the Region passed a bylaw to formally authorize this. 5.1 Option 1: Upload service to Durham Region Despite local municipalities have been given the authority to carry out economic development services, this service function is not mandatory. Municipalities within Durham Region can choose not to undertake the provision of this service and let the local economy and market place take their course. If Clarington chooses not to undertake economic development service delivery, it can request the Region to provide the said service. Currently, the Region provides economic development service to Brock, Scugog and Uxbridge at no cost to these municipalities. While this option may appear financially attractive, it would not be in the best interest of the Clarington to upload this function to the Region. The limited resources at the Region may render it difficult for regional staff to give proper attention to Clarington. Any local economic development works would still require Clarington to be involved. Under this scenario, Clarington will not officially engage itself in economic development service delivery. However, the reality is that there will be continuous local economic development initiatives that will require staff resources and business prospects will continue to contact Clarington for all kind of assistance, such as seeking specific information, requesting help to locate new business, and to fast track development application. REPORT NO.: CAO-01-08 PAGE 5 5.2 Option 2: Hiring a Business Facilitator Given the scenario described in option 1, it would be advisable for Clarington to have one full time staff person solely dedicated to the task of assisting new businesses. The individual will not be performing the traditional role of an economic or business development manager but would concentrate on assisting new businesses to assemble information, cut red tape, and fast track approval from various external agencies and internal departments. Working under the direct supervision of the CAO, the Business Facilitator will be empowered to undertake whatever necessary to ensure the new business can experience top- notch customer service and a smooth and quick business development process. The cost of this individual can be offset by the saving from not fully engaging the Board of Trade to provide economic development service. It is estimated that about $80,000 is required to cover salary and benefits for the new business facilitator and the balance $20,000 can be used to relieve budget pressure or be diverted to the Board as an annual subsidies. This option focuses on a very specific aspect of economic development and the individual should not be considered as an economic development officer nor expected to be such a person. 5.3 Option 3: Establish an Economic Development Office/Department Most municipalities in Ontario undertake some forms of economic development through in-house staff. Except for Clarington, all shoreline municipalities in Durham Region undertake this service by municipal staff. The obvious advantage of this option is accountability as the economic development staff has a direct reporting relationship to Council through an organization structure. In addition, economic development staff tends to be able to access municipal data and information more readily, and can be readily supported by other municipal staff should the need arises for those occasional projects that require additional resources. The cost of operating an economic development division/department can be challenging. When Clarington last did this in 1997, the Economic Development Office was staff by an Economic Development Officer (EDO) and an Administrative Assistance with an annual operating budget of $150,000. Similar staff compliment would probably require a minimum of $200,000 to be set aside in the 2008 budget. This option requires finding an additional $100,000 in addition to the $100,000 currently provided in the base budget. REPORT NO.: CAO-01-08 PAGE 6 5.4 Option 4: Outsource service to the Clarington Board of Trade Since 1998, the Clarington Board of Trade has been undertaking economic development works on behalf of the Municipality. Council of the day embraced the "business attract business" principle and accepted the recommendations of the Mayor's Task Force on Economic Development that it is in the best interest of all concerned that economic development services be delivered by a willing party in the name of the Clarington Board of Trade. Looking back at this past ten years, municipal staff has enjoyed a very good working relationship with the Board's staff. Both parties understand that economic development effort is a partnership venture and both have collaborated on many economic development initiatives. From staff perspective, the current outsourcing option has worked well for Clarington and seems to provide good value. Notwithstanding, the question of accountability has been raised occasionally in the past by some council members. The Board is aware of this concern and has taken actions to alleviate this concern. For example, the Board has now made quarterly report to council updating various economic development activities and initiatives. The recent reporting also focuses more on performance issues and results ensuring council is better informed. Should council choose the option to continue the contract relationship with the Clarington Board of Trade, the following terms and conditions will be included in the agreement. a) A three year contract for 2008 to 2010 inclusive with the option for a one year automatic renewal subject to agreement by both parties and at a three percent fee increase. b) The fee for service shall be $103,000 for 2008; $106,500 for 2009, and $110,000 for year 2010. c) The responsibilities assigned to the Board would be under the general umbrella of economic development with special focus on business attraction and retention. d) The Board shall report and update council quarterly pertaining to all economic development activities undertaken. e) The Board and its employees shall refrain from engaging in any activity that would negatively impair the relationship between the Municipality and the Board, and REPORT NO.: CAO-01-08 PAGE 7 f) The Municipality will continue to provide free office space to the Board at the Tourism Office at Liberty StreeUHWY 401. 6. Conclusion There is no perfect business model for the delivery economic development service. What works for one municipality does not necessary work for another due to a whole set of different circumstances. The CAO is of the opinion that the current outsourcing system has proven very cost effective and the partnership between business and government has worked well. That's said; Council should carefully review each option and arrive at its own conclusion.