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HomeMy WebLinkAboutAddendum to Report CAO-004-16Chief Administrative Office Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: Council Date of Meeting: October 31, 2016 Report Number: Addendum to Report CAO-004-16 Resolution: File Number: By-law Number: Report Subject: Clarington Board of Trade Contract Renewal - Performance Measures Recommendations: 1.That Report CAO-004-16 and Addendum to Report CAO-004-16 be received; 2.That Council approve the renewal of the contract with the Clarington Board of Trade for the delivery of economic development services as recommended in Report CAO-004-16; 3.That the approach proposed for performance measures as set out in section 2.2 of this Addendum to Report CAO-004-16 be included in the 2017-2021 contract with the Clarington Board of Trade; 4.That all interested parties listed in Report CAO-004-16 and any delegations be advised of Council’s decision. Municipality of Clarington Addendum to Report CAO-004-16 Page 2 Report Overview On October 17, 2016 the General Government Committee considered Report CAO-004-16 which recommended that Council approve the renewal of the contract with the Clarington Board of Trade (CBOT) for the delivery of economic development services based on certain conditions, at a graduated fee starting at $330,000 in 2017 and reaching $484,000 in 2021 commensurate with a graduated increase in services. This increase in services is to recognize that Clarington faces unprecedented opportunity for jobs and investment and that economic development is the Municipality’s top Strategic Plan priority. Clarington’s historical level of service and consequent investment has not reflected this priority neither as compared to other municipalities nor as compared to its investment in other services. Committee asked many questions of CBOT representatives and learned of their robust business plan based on leading practices in this service that identifies 61 unique actions that CBOT intends to undertake. Committee asked that the Interim CAO report to the Council meeting of October 31st on the specific accountability measures to be set out in the agreement with the CBOT. This report sets out recommended measures based on best practices and discussion with the CBOT. 1. Background 1.1 At the October 17, 2016 meeting, the General Government Committee considered Report CAO-004-16 which recommended Council approve the renewal of the contract with the Clarington Board of Trade (CBOT) for the delivery of economic development services, based on certain conditions and at a graduated fee starting at $330,000 in 2017 and reaching $484,000 in 2021 commensurate with a graduated increase in services. The service has been provided for the last five years at an annual fee of $225,000. The current contract expires on December 31, 2016. 1.2 The Interim CAO suggested in his previous Report (CAO-004-16) that while the costs as proposed by the CBOT are projected to increase over time, so will the service offering and the service needs to be significantly enhanced if Clarington is to recognize: the priority that the Municipality has attached to economic development, its key financial structural challenge of a 90/10 split in residential/commercial & industrial assessment, and the very significant opportunity before Clarington to realize jobs for residents and investment in local businesses if it can optimize the advantage to local businesses of the tremendous level of external investment it is about to experience. The Report further stated that the current underinvestment risks the community’s ability to address these key challenges and opportunities. Municipality of Clarington Addendum to Report CAO-004-16 Page 3 1.3. Through discussion with the CBOT representatives, Committee learned of their significant contribution to gaining results for the community to date – from connecting local businesses with major infrastructure projects to influencing the decision makers on these major infrastructure investments. They also learned about the CBOT’s robust business plan, based on leading practices in this service that identifies 61 unique actions that CBOT intends to undertake. Matters that Councillors suggested needed attention will be addressed, including reviewing branding and communications, enhancing the tracking of real estate vacancy rates, implementing business retention and expansion initiatives for downtowns as well as for the manufacturing sector and enhancing the system for tracking business leads. These 61 actions will address these key challenges and opportunities, and Committee was advised that these would be compromised with a level of investment less than what it would cost to provide these activities. They were also advised on the cost allocation approach of the CBOT to ensure fairness in the distribution of the costs between the membership and the service contract. 1.4 The Interim CAO, recognizing the need for enhanced accountability in the delivery of this service, and the significant increase in the funding proposed for the service, recommended in Report CAO-004-16 that the Municipality make it a condition of the contract that before moving to the funding level of $443,000 proposed by CBOT for 2018, that the CBOT demonstrate to the Municipality substantial completion of its proposed 2017 workplan. He also recommended that generally accepted performance measures for economic development service be established and written into the service contract and he provided six examples of these measures. 1.5 Committee asked that the Interim CAO report to the Council meeting of October 31, 2016 on the specific accountability measures to be set out in the agreement with the CBOT. The Interim CAO suggested this short turn around time recognizing that finalizing the contract is of some urgency in order to effectively plan and implement the services, especially given the condition that substantial completion of the 2017 workplan will be required before releasing funding for the balance of the contract. If this timing is compromised, then this condition will need to be revisited. 2. Policy Analysis 2.1. The Interim CAO, drawing on performance measures suggested by the Economic Developers Association of Canada, and measures used by Peterborough Economic Development, discussed with CBOT which of these measures would be relevant to Clarington. After intensive discussion with the Executive of the Board of Directors, some 14 measures were identified as suitable, feasible and that the Board would be willing to be held accountable for. 2.2 Both activity measures (six of them) as well as outcome measures (seven of them) were identified to recognize that success on the first leads to success with the second, so each need to be tracked. The Interim CAO encouraged, based on the Committee discussion, that targets be set. He also suggested that some targets take longer to reach and should Municipality of Clarington Addendum to Report CAO-004-16 Page 4 be expressed as a five year target whereas others are practical to suggest as annual targets. He also encouraged that a percentage increase be established rather than absolute number as in many instances a baseline will need to be established. The recommended measures are set out in Attachment 1. It is recommended that the contract with CBOT provide that CBOT’s performance in relation to these measurable be reported to Council at least once per year in every year of the contract. 3. Conclusion Economic development needs to be delivered at a service level commensurate with the priority Council has attached to jobs and investment for Clarington. A robust plan with some 61 actions has been developed by the Clarington Board of Trade to help deliver these results. This requires a significant increase in the Municipal support for this service. Enhanced accountability for this support goes in hand with this increase. Suitable, feasible and acceptable measures of performance have been developed for this purpose. These, combined with the existing accountability actions and the enhanced ones suggested in Report CAO-004-16 to General Government Committee, should be reflected in the Municipality’s contract with the Clarington Board of Trade to ensure a strong return on investment for the Municipality. 4. Strategic Plan Application The recommendations contained in this Report conform to the Strategic Plan. Submitted by: Curry Clifford, MPA, CMO, Interim CAO Staff Contact: Curry Clifford, CAO, 2002 or cclifford@clarington.net Attachments: Attachment 1- Clarington Economic Development Tracking Targets Attachment 2 – Report COA-004-16 The following is a list of the interested parties to be notified of Council’s decision: Board of Directors, Clarington Board of Trade Municipality of Clarington Addendum to Report CAO-004-16Attachment 1 to Addendum to Report CAO-004-16 Clarington Economic Development Tracking Targets- See notes below for explanation of targets Activity 2017 Target % increase over 2016 2018 Target % increase over 2017* 2019-2021 Target Annual % increase over previous year** Corporate Calls Made 30% 15% 3% Inquires responded to 10% 5% 2% Investment Outreach 20% 10% 3% Youth Engagement 10% 5% 2% Business Mentorship 20% 10% 3% contacts @ Tradeshows Conferences and Events - total proactive contacts 25% 15% 3% Outcomes 2018 Target Annual % increase over 2017*** 2019-2021 Target Annual % increase over previous year Job Growth and Retention 1% 1% Number of Business Locations 1% 1% Announced Investments - New and Expansion 3% 1% Brand Awareness (Readership numbers) 5% 2% Local Business Partnerships Facilitated 10% 2% In addition CBOT has two outcome targets that are a 5 year timeframe: first, a 1% decrease in the proportion of residents leaving Clarington for work vs working in Clarington and second, a 2% increase in total capital investment in Clarington Notes * 2018 Targets are based on additional increase to realized 2017 targets ** 2019-21 Targets are based on additional increases realized in previous years and existing and new programming to be maintained *** Outcome targets are set starting in 2018 , rather than 2017 as the programming - including the activities measured above- will need to be put in place in 2017 in order to start generating these type of outcomes Chief Administrative Office Report If this information is required in an alternate accessible format, please contact the Municipal Clerk at 905-623-3379 ext. 2102. Report To: General Govern Committee Date of Meeting: October 17, 2016 Report Number: CAO-004-16 Resolution: File Number: By-law Number: Report Subject: Clarington Board of Trade Contract Renewal Recommendations: 1.That Report CAO-004-16 be received; 2.That Council approve, conditional on the accountability measures set out in this report, the renewal of the contract with the Clarington Board of Trade for the delivery of economic development services for a period of five years (2017- 2021 inclusive) for a graduated fee based on increases in service offered as described by the CBOT in its proposal to Council starting at $330,000 in 2017, moving, conditional on substantial completion of the 2017 workplan as summarized in Attachment 1 of this report, to $443,000 in 2018, $456,000 in 2019, $470,000 in 2020 and $484,000 in 2021 3.That the 2017 allocation of $330,000 be a preapproved amount in the 2017 budget; and 4.That the Mayor and the Clerk be authorized to execute an agreement with the Board of Trade; and 5.That all interested parties listed in Report CAO-004-16 and any delegations be advised of Council’s decision. Municipality of Clarington Report CAO-004-16 Report Overview Clarington faces unprecedented opportunity for jobs and investment. This is its top Strategic Plan priority. To realize the highest possible local benefits of this opportunity, the Municipality will need to significantly increase its investment in this service to a level comparable to other municipalities and comparable to other Clarington services. CBOT has developed a robust business plan based on leading practices in this service that can deliver these benefits at a competitive and graduated cost. Key options for delivering this service are analyzed against the criteria most relevant to this decision. The report concludes that contracting with CBOT offers the best value for money and minimal reputational risk and recommends additional accountability measures. 1. Background 1.1. “Facilitate the creation of jobs, attraction of new businesses and expansion of existing businesses” is the first of six priorities that Council has established for its term in the Municipality’s 2015-2018 Strategic Plan. A key means to deliver on this priority is a strong economic development service. This service has been delivered under contract for the last 16 years by the Clarington Board of Trade. 1.2. The current contract expires on December 31, 2016 and would require a decision of Council to continue the contractual arrangement and determine the costs to continue or expand the services provided. The current contract provides for an annual fee of $225,000. The Board has discussed with the Interim Chief Administrative Officer its Business Plan which contains a proposal for a five (5) year contact renewal to reflect a graduated fee structure based on increases in service offered starting at $330,000 in 2017, moving to $443,000 in 2018, $456,000 in 2019, $470,000 in 2020 and $484,000 in 2021. See Attachment 1 and additional information, including the Business Plan, which will be distributed by CBOT to Council under separate cover. 1.3. Since assuming the responsibility of economic development in 1999, the Board of Trade has gradually evolved into an umbrella organization of all local business groups and associations. Working in concert with those economic development partners, 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 business development. The Board has established a strong presence within the Greater Toronto Area economic development community and nationally in the nuclear industry. 1.4 The CBOT has evolved to a point that community minded leaders in the diversity of Clarington’s economy – from manufacturing to agriculture to tourism to finance, insurance and professional services to nuclear to retail to residential and commercial Municipality of Clarington Report CAO-004-16 Page 3 development to post secondary - are actively engaged in the leadership of Clarington’s economic development. These business people offer Clarington their skills in business development, their orientation to solving business problems and seizing business opportunities and their considerable network to work with professional economic development staff employed by them as a Board. In municipal terms in Ontario this is rare to have this depth of engagement. It means that businesses that are considering expanding or locating in Clarington are met with this business orientation. And it means that instead of conflict with the business community, as is seen in some other communities, the Municipality of Clarington experiences collaboration. 1.5. The Interim Chief Administrative Officer has had the privilege of working closely with the Board staff over most of the term of the current contract. He has experienced how their initiative, experience and strategic orientation has helped Clarington gain: a $12.5 investment in nuclear refurbishment; a commitment from the Premier that can realize 21,000 jobs around the hubs of an extended GO Train service; the expansion of businesses in Clarington’s innovative agriculture sector, emerging health sciences sector, revitalized tourism sector, niche manufacturing sector and in the nuclear supply chain. 1.6. Clarington is now home to three of the top 100 infrastructure projects in the whole of Canada. The Interim CAO has seen how the CBOT needs to, and is willing to “up its game” - to undertake its own transformation - in order to optimize for the community the benefits of the transformational economic change that is before Clarington. 1.7. While the costs as proposed by the CBOT are projected to increase over time, so will the service offering and the service needs to be significantly enhanced if Clarington is to recognize: - the priority that the Municipality has attached to economic development - its key financial structural challenge of a 90/10 split in residential/commercial & industrial assessment - the very significant opportunity before Clarington to realize jobs for residents and investment in local businesses if it can optimize the advantage to local businesses of the tremendous level of external investment it is about to experience. The current underfunding risks the community’s ability to address these key challenges and opportunities. Municipality of Clarington Report CAO-004-16 Page 4 2. Policy Analysis Key criteria for decision-making on service delivery: 2.1. From a service delivery perspective, the Municipality needs to satisfy itself that how it chooses to deliver any service, including economic development, will meet a number of criteria. These criteria have been established through municipal sector experience over many years and continue to evolve and have been highlighted for Council in other contexts. In the context of this service there are three key criteria: - value for money - accountability - reputational risk. Key options for service delivery: 2.2. There are a range of options for how to deliver this service. The key ones are: a. In-house service delivery b. Creating a special purpose body for this service along the lines of what Kingston and Peterborough have done c. Contract with the CBOT for service delivery 2.3 Option analysis a. In-house service delivery Pros: - offers strong accountability to Council as Council can define the service outcomes, the broad means by which they will be achieved and can adjust resources each year based on results achieved rather than another body determining these matters - permits direct management of reputational risk as the Municipality can impose its corporate and public policy directions and financial controllership policies and directly monitor and adjust its practices. Municipality of Clarington Report CAO-004-16 Page 5 Cons: - unlikely to provide the value for money of other options as the costs (both base and per unit costs, including salaries and wages, benefits, pension, accommodation) are likely to be higher. As well, considerable business expertise would be unlikely to continue to be provided without charge. At the same time, the benefits would likely be lower as the Municipality could not easily acquire the local business expertise and orientation and willingness of investors to share candid information that comes with businesses serving business with the contract arrangement - nimbleness to respond to reputational risk may be reduced as municipal governments need to respond to a wider range of (sometimes competing) objectives and make decisions in a more complex and regulated accountability framework. b. Creating a special purpose body for this service Pros: - opportunity for the benefits part of value for money to be strong as the organization is focussed on only one key public objective – economic development – and does not have competing public objectives. Cons: - accountability has long been recognized as a key weakness of special purpose bodies: they don’t tend to need to compete internally with a wide range of other public priorities nor compete in the marketplace so natural accountability incentives are absent. Accountability is that much more difficult in the economic development area regardless of who delivers this service because, as it has been well recognized, there are so many variables that effect outcomes. Added to the difficulty is that special purpose bodies in this service are generally governed by multi stakeholder organizations and the executive can easily serve as delegates of these organizations rather than as trustees representing the best interests of the organization they are governing. - Arresting risks to the reputation of the Municipality can be more difficult to quickly address in this more complex and less accountable environment. Municipality of Clarington Report CAO-004-16 Page 6 - costs can be significant both because a new body would need to be created and because the incentives for clear accountability are not inherent. The consequent expenditure control that comes with that accountability arrangement is more difficult to muster. Moreover, the in-kind contribution of volunteers as experienced with the expertise brought by the CBOT membership to the operation of the service is unlikely to be as prominent where they are not directly responsible for delivering the service c. Contract with the CBOT for service delivery Pros: - strong value for money – both on the cost and benefit side. On the cost side, as is illustrated in Attachment 1, the costs are very competitive as against both other municipalities’ costs of delivering this service and as against other services of the Municipality. Even with the increases proposed, Clarington would remain on the low end of per capita spend of neighbouring municipalities and economic development would remain at less than $1 of the $100 Clarington portion of the tax bill and less, as an example, than the comparative share of Animal Services. On the benefit side, CBOT has developed a strong program and business plan based on a very useful framework developed by the province from best practices in the delivery of this service. From creating a common portal for employers and those seeking work, to enhancing site locator information to strengthening partnerships with industry associations, post secondary and the Municipality itself (from procurement, to the development approval process, to government relations), the critical bases will now be covered as the service is enhanced through a graduated approach. - Reputational risk for the Municipality with this option is limited as the contractor has a built in incentive to protect the reputation of the Municipality as success in the other side of its services – services to members and potential members – depends on this. Moreover, the CBOT is not providing services in other communities so cannot spread its risks over a wider base so is further motivated to manage this carefully. Municipality of Clarington Report CAO-004-16 Page 7 Cons: - Accountability will never be as direct as it would be with direct service delivery and that is a trade-off when contracting for any service. It can continue to be mitigated however through regular reporting to Council, involvement of Council and senior staff in CBOT events and the participation of senior staff – currently the Interim CAO - on the Board of Directors of CBOT as the Municipal Advisor. - Reputational risk for the Municipality can never be completely eliminated in any option. Better information sharing between the Municipality and the CBOT and vice versa has started and this will go some way to managing this risk. Enhancing Accountability 2.4 The analysis indicates that on balance Clarington would be best served by contracting for economic development services from the CBOT. At the same time, the CBOT’s proposal represents a significant increase in the investment in this service – and paragraph 1.7 above illustrates why this level of increase is necessary. At the same time, the accountability for this service could be stronger. To address both issues, it is proposed that the Municipality make it a condition that: before moving to the funding level of $443,000 proposed by CBOT for 2018, that the CBOT demonstrate to the Municipality substantial completion of the 2017 workplan as summarized in Attachment 1 of this report that generally accepted performance measures for economic development service be established and written into the service contract, including as examples: number of jobs attracted; business expansion investment facilitated by CBOT action; increase in commercial and industrial assessment base; cost savings for businesses assisted as a result of CBOT programs; active investment prospects in the pipeline; percentage of business leads that choose to locate in Clarington. 2.5. Concurrence Not Applicable Municipality of Clarington Report CAO-004-16 Page 8 3. Conclusion Economic development is the Municipality’s top priority. Clarington faces unprecedented opportunity for jobs and investment. To realize the highest possible local benefits of this opportunity, the Municipality will need to significantly increase its investment in this service to a level comparable to other municipalities and comparable to other Clarington services. CBOT has developed a robust business plan based on leading practices and the input from business in this service that can deliver these benefits at a competitive and graduated cost. Compared against other feasible options, contracting with CBOT offers the best value for money and minimal reputational risk for the Municipality. Additional means to enhance accountability will, combined with these benefits, provide Clarington the opportunity for a prosperous future. 4. Strategic Plan Application The recommendations contained in this report conform to the Strategic Plan. Submitted by: Curry Clifford, MPA, CMO Interim CAO Attachments: Attachment 1- Summary chart of proposed business plan, comparative table showing economic development costs per capita and graph showing economic development share of tax bill Note: Additional material to be distributed by CBOT to Council under separate cover The following is a list of the interested parties to be notified of Council’s decision: Board of Directors, Clarington Board of Trade 2017 Continue and expand current programming Adjust Structure Identify appropriate office location 1 New Hire Identify Project Priorities Implement top 3 new initiatives Launch new tracking system Planning for employment portal Participate in top 3 conference, tradeshow/advertising as identified Expand efforts for Hospital revitalization project Research models for Incubator/Accelerator Office Space –identify our model and begin planning 2018 Continue and expand existing programming Settled in identified location Structure for incubator in place Equip the incubator 1 New Hire Identify remaining priority projects and implement Expand conference/tradeshow and advertising activities Develop and Launch new employment Portal 2019 Continue and expand existing programming Implementation of ¾ of programs identified in 2017- 2021 plan will be completed Begin process for economic strategic plan 2022-2027 2020 Continue and expand existing programming Implementation of ¾ of programs identified in 2017- 2021 plan will be completed continue process for economic strategic plan 2022-2027 2021 Continue and expand existing programming Implementation of ¾ of programs identified in 2017- 2021 plan will be completed continue process for economic strategic plan 2022-2027 $330,000 $443,000 $456,290 $469,978.70 $484,078.06 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 $ -in dollarsPer Capita 2016 Estimated Population Pickering Ajax Whitby Oshawa Clarington Port Hope Cobourg Peterborough Milton Your taxes pay for many Municipal services. Here’s a breakdown of how each $100 of the Clarington portion of your tax bill is spent. $0.05 $0.17 $0.39 $0.50 $0.57 $0.70 $0.97 $1.10 $1.31 $1.51 $2.73 $3.63 $4.07 $5.25 $10.28 $10.81 $14.53 $20.19 $21.24 BUILDING INSPECTION COMMUNITY GRANTS ECONOMIC DEVELOPMENT TOURISM DEBT SERVICING CROSSING GUARDS ANIMAL SERVICES MUNICIPAL LAW AND PARKING ENFORCEMENT COMMUNICATIONS CULTURE ENGINEERING SERVICES WINTER MAINTENANCE COMMUNITY PLANNING LIBRARY RECREATION FACILITIES AND PROGRAMS CAPITAL FINANCING CORPORATE SUPPORT FIRE SERVICES OPERATIONS* * INCLUDES ROADS, PARKS, CEMETERIES, BUILDINGS, STREETLIGHTS & SIDEWALK MAINTENANCE ETC.