Offering financial incentives to lure businesses is risky, says Red Deer official

Red Deer’s land and economic department working on a new strategy

Alberta’s slow economic recovery could lead more communities to offer cash incentives to boost growth along the lines of Calgary’s $100-million fund, says a city official.

“I think there is going to be more of this,” said John Sennema, the city’s land and economic development manager, on Thursday.

“At the end of the day, we have to be careful with incentives. They can be great and they can help stimulate, but is it also a race to the bottom?

“They have to be well thought out, I think, and very strategic. The money has to come from somewhere, eventually — and really, it’s got to come from the tax base.”

RELATED: Cities shouldn’t have to buy jobs.

Opportunity Calgary Investment Fund doled out $4 million to Parkland Fuel Corp. to help it consolidate its headquarter staff — doubling it to 400 workers.

As part of the move, the company that was started in Red Deer, plans to transfer 120 positions from here to Calgary.

Sennema and his staff are putting together an economic development strategy they expect to take to council in the fall.

“We’re not just sitting back and watching this happen. We know the environment we’re in and we’re trying to proactively plan it.”

It is too early to talk about specific proposals, but the merits of direct financial incentives are likely to be discussed, among other options, said Sennema.

“(Incentives) don’t always have to be financial in nature,” he said.

A municipality may want to encourage development of brownfield properties — lots left undeveloped, often for years — by delaying the inevitable tax increase that would come as a property is developed and its value boosted.

“It doesn’t necessarily have to come out of the tax base, because we’re getting 100 per cent of nothing right now, regardless,” he said.

“If you give them (an assessment) holiday for five or 10 years, maybe that’s a way to stimulate growth.

“That’s an example of a way you could go about it, without having to put huge dollars in a pool,” he said, adding that he was using that scenario as an example, not as a hint of what is coming.

Providing direct financial incentives to businesses has proven controversial in the past. Former premier Ralph Klein often said the government was not in the business of doing business.

The Red Deer & District Chamber of Commerce also sounded a note of caution this week about mimicking Calgary’s economic development approach.

Reg Warkentin, the chamber’s manager of policy and advocacy, warned about governments picking “winners and losers,” arguing a better approach was to keep municipal taxes low and spending in check.

Sennema does not see Calgary’s move as a bid to lure jobs away from Red Deer. Parkland likely was on the way anyway, he believes.

Calgary civic leaders were likely responding to their financial challenges, which includes an abundance of vacant office space and a tax-weary business community.

“They need wins too,” said Sennema. “They’ve got to show their folks that they’re doing something to stimulate the economy down there as well.”

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