Burlington City Council Presentation re: “The New BEDC”

February 27,2014

Meeting Objective

Update City Council on the Transformation of the “NEW BEDC”

Agenda

1. The Call to Action 2. The BEDC’s Current Work 3. The Business Case 4. Strategy Questions 5. Action Steps 6. Legal Framework 7. Governance Documents and Time line 8. Questions and Answers

“The Best Way to Predict the Future is to Create It!” -Peter Drucker

BEDC Current Work

2014 Budget

• City Base: $980,730 • Program Change: $228,900 • Major Components:

– Business Development & Retention – Investment Attraction & Marketing

BEDC Organizational Structure

Executive Director Vacant

Manager of Business Development

Permanent

Economic Analyst Intern

Contract Vacant

Program Manager, Investment Attraction

Contract

Office Manager Permanent

Manager, Investment Attraction/Marketing

Contract

Communications & Marketing Co-ordinator

Contract

Innovate Burlington Manager Contract

Accountant Permanent Part-time

Vacant

• Currently Five Employees in BEDC Office • One Employee at Innovate Burlington • Account role to be assumed by City of Burlington

Lead

Prospect

Opportunity

Win

New Builds Existing Space (Lease and Purchase)

Bona fide Interest Established

Site Selection/Needs Assessment

Site Plan

Building Permit Issued

Bona fide Interest Established

Site Selection/Needs Assessment

Site Plans/Site Tours

Purchase/Signed Lease

Burlington Development Pipeline

Burlington Development Pipeline Based on BEDC Forecasts and Best Estimates

23

21

38

18

Status of Pipeline

Lead Prospect Opportunity Win

5

6

6

1

Number of Wins by Property Type

Industrial

Office

Retail

Institutional

2,765

10,364

696 956

0

2,500

5,000

7,500

10,000

12,500

Prospect Opportunity Win

Maximum Potential Employment by Pipeline Status for new projects

Employee Capacity of built, unoccupied space

Employees

0

50,000

100,000

150,000

200,000

250,000

2013

2014

2015

2016

2017

Incremental GFA (m2)

Potential GFA of Prospects

Potential GFA of Opportunities

Actual GFA of Wins

Total Prospects and Opportunities n

Pipeline:

Total Wins in 2013:

Data as of Dec. 31, 2013

59

18

Major Wins

Project Address Type Gyptech Technologies 578 Kings Forest Crt Office

Kone Cranes 1355 Sutton Dr Industrial Emery Investment 4900 Palladium Way Office/Retail Emery Investment 4903 Thomas Alton Office/Retail

Lowes 3270 Harrison Crescent Retail Zook Canada 4400 South Service Rd Industrial

Innovation Plus Power Systems Inc. 1220 Corporate Drive Industrial Wilkinson Construction 2177 Plains Rd E Industrial

3095 New St. Office Joseph Brant Hospital 1221 Lakeshore Institutional

Burlington Development Pipeline

KPIs 2013 2014

Target Actual Target Investment Targets 50 150 70

Investment Leads 12 23 18

*Does not include employee capacity for 956 employees of built, unoccupied space

Economic Indicators

2013 2014

Target Actual Target Development projects - wins (SF)

600,000 663,950 860,000

Expected tax revenue $400,000 $1,138,928 $617,000

New jobs 1,000 696* 1,000

Key Performance Indicators (KPIs)

Economic Indicators

Burlington Development Pipeline

Establishing InRoads Social Media

• Targeted to SIOR brokers, Pinterest drives more traffic to websites and blogs than YouTube, Google and LinkedIn combined.

• Allows business & services to follow our offerings. Page has been labeled as ‘more comprehensive than most other EcDev agencies by EDCO members.

• Enjoyed an increase in followers to our ‘business voice’. Introduced a proactive approach to energies inside and outside Halton, utilizing one constant voice.

Establishing In-Roads Tactics

• Water Niche

– Presence at international trade shows – Building relationships with water agencies such as

WaterTap – Colombian Water Forum, done in conjunction with Export

Development Canada set in stone Burlington’s relationship in Water

• Business Summit – Fraunhofer Institute trip to Burlington. Strengthening a

relationship that can bring international prevalence to Burlington.

Paving the Road for Electronic Communication

• Transitioning to on-line, friendly platform to better access and share information more easily

• Information can be updated to ensure accuracy and market credibility

Business Retention and Growth • Business First Corporate Calling Program • Development Facilitation • Investment Opportunity Development • Employment Districts - QEW Portfolio • Partnerships Mid Town, Paletta properties, Mobility Hubs, Downtown • Plains/Waterdown Proposal Development • Servicing GAP Analysis • Retail Recruitment Strategy • Downtown Parking lot 3, 7 & 8 Concept & Strategy • Parking Lot 4 & 5 Analysis • Waste Water Technology Centre • Employment Lands Official Plan Review • Community Improvement Plan

2013 • Budget: $298K • Graduates entering employment:9 • Companies supported:17 • Consulting Revenue: $170K • Grant Revenue: $128K 2014 • Budget: $958K • Graduates entering employment: 20 • Companies supported: 40 • Consulting Revenue: $829K • Grant Revenue: $135K

Innovate Burlington

Business Case and Core Belief

We believe that we can enhance the Quality of Life for all Burlington Citizens for generations to come by Incorporating Burlington’s Economic Development and Property Management Company to unlock the value of our real estate as a catalyst for Strategic ICI and Job Growth in a manner consistent with Council’s Vision for the City as articulated in the Strategic Plan 2011-2014.

Metrics for DevCo/BEDC Burlington has been actively involved in shaping robust and vibrant communities where citizens can both live and work. As such, employment lands are critical to the short-term, medium-term and long-term economic and social viability of the city and its various neighborhoods. The development of employment lands reflect principles of sustainability, including greater land use efficiency. As an economically healthy city, Burlington is positioned as a place where businesses want to stay and expand, and new businesses want to locate. In keeping with its focus on sustainability, Burlington values its agricultural land base and the social, economic and environmental benefits it provides. The vision is accompanied by supporting principles and recommended area employment land strategies that proactively respond to the employment lands’ challenges in Burlington.

Key Principles Include • The city is committed to being competitive and to pro-actively encouraging local

economic growth and retention as well as expansion of existing businesses to achieve a mix of jobs that support different market sectors and, in turn, a sustainable tax base.

• A more balanced tax base ratio of residential to business is critical to municipal well being as it lessens the dependency on the residential tax base.

• The rural lands are important to the overall fabric of Burlington and contribute positively to the economy and allows for vibrant communities.

• The city is dedicated to ensuring an adequate supply of shovel ready employment lands to facilitate short-term, medium-term and long-term economic growth.

• High quality and environmentally responsible development of employment lands is supported, as are the benefits associated with such developments.

• The city supports economic development that will influence the creation of high quality jobs in the most appropriate locations.

• The city will encourage increased employment densities where appropriate, i.e. employment lands, urban centres and emerging areas such as identified business corridors.

Triple bottom-line objectives Financial • Increase the city’s non residential tax levy revenues. • An accelerated employment growth rate of approximately 1,526 jobs per

year for a total of approximately 29,000 new jobs across the city by 2031 (of which approximately 24,000 on employment lands).

Social • Growth in high quality jobs from 41% to 60% within 20 years. • 50% of all new jobs are occupied by Burlington residents. • An accelerated Employment density target from 41 jobs/hectare to

approximately 59 jobs/hectare. Environmental • Healthy community (factors from the 2011 Employment Lands Study). • Preservation of the rural area. • Reduction in the city’s carbon footprint.

BEDC Strategy-Questions to Answer

1. Why Create a Separate DevCo with City Real Estate Assets?

2. City Lands are a Small Part of the Land In Burlington, How Can they make a difference?

3. What Happens if we Do Nothing? 4. What could happen if we did this?

Why Separate DevCo with City Real Estate Assets

• Focus • Real Estate Development Expertise • Accountability for ROIC within City Strategy • Lean Organization • Credibility with Developers, Bankers, Prospective

Employers and other External Stakeholders • Demanding Customer of City: Product

Improvement • Access to Capital • Speed of Decision Making- Opportunistic Deals

How Can City Assets make a difference.

• Credibility to Do Deals- Avoid “Big Hat, No

Cattle” reputation • Seed Capital- DevCo Purchased Lands • “Skin in the Game” • Incentive for City to improve Development

Processes with the understanding of a Developer’s issues

• Accountability to clear “Red Tape” and create the “Red Carpet” capability for Prospects.

What Happens if we Do Nothing

• We undermine Strat Plan Prosperity Agenda – Not Nurturing an Innovative Business Community – Not a choice for knowledge base employers(ees) – Marginal increase in Employment

• Reduced level of B&I assessment as assets age out without new investment.

• Tough Decision whether to raise residential assessment or cut services

What Could Happen with DevCo?

• Could be the First Domino to fall that stimulates a renewal of C&I Development in the City.

• Could Attract Young Knowledge base workers through attractive educational campuses

• Could solve problem real estate issues where costly remediation stymies development

• Could create a dividend to the City Will Create Jobs and Improve C&I Assessment

Burlington Land Inventory

Overview of Projects 1. Brownfield Community Improvement Plan 2. Employment Lands Study - Phase 1 3. Halton’s Best Planning Estimates (2011-

2031) 4. North Service Road Business Case 5. Bronte Business Case 6. Securing our Future: Employment Lands

Operational Plan 7. Employment Lands Study - Phase 2 8. Update on Employment Lands

Presentation 9. Prosperity Corridor One Pagers

10. MHPM Consulting – DeGroote/Voortman 11. Halton Non Residential Tax Competitiveness

Analysis -Cost Competitiveness Chapter 12. Dillon Consulting - High Level Serving Review 13. Planning Partnership – Waterdown/Plains Rd. 14. Property Inventory 15. Draft Downtown Development Potential 16. Parking Lot Studies (MHPM, Lots 3, 7 & 8) 17. Parking Lot Studies (Deloitte, Lots 4 & 5) 18. Mobility Hubs Opportunities and Constraints

Dynamic Employment Nodes (DENS)

Two Phased Approach - BEDC/DEVCO A two phase approach is contemplated to:

1. organizationally align economic development and planning; and

2. acquire, enhance and market key development sites.

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PHASE I

• Align economic development and planning organizationally by having city planning report to the general manager who also oversees BEDC.

• BEDC is a not-for-profit without share capital company. It’s objects are unaffected by the proposed change and no letters patent amendment is required.

• The Corporations Act and the Municipal Act are not triggered.

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PHASE I – Economic Development and Planning Alignment

City

City Planning

BEDC

General Manager

BEDC Staff

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PHASE II • the creation of DEVCO and a holding corporation

wholly under the City’s control to provide the City with flexibility to deal strategically with development sites through a corporate vehicle

• the corporations would be created pursuant to section 203 of the Municipal Act

• Section 203 permits municipalities to create corporations for a wide variety of purposes including development corporations and public/private partnerships

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PHASE II

City

DEVCO Other

Corporate initiatives

BHEI

BHI BESI

City Services

BEDC

Holdco Common/ Overlapping

Boards

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DEVCO • Under the regulations, a corporation must be incorporated by the

city only (or in conjunction with other public sector entities) and its purpose is to provide a system, service or thing that the city itself could provide.

• City may acquire, hold or deal with securities of a corporation only if the corporation is established by a public sector entity and the corporation carries on business in the municipality or the municipality and another municipality.

• Subject to limitations in the regulations, creation of Devco is permissible as it is created by the City, operates in the City and carries on an aspect ordinarily undertaken by the City.

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HOLDCO

• City can incorporate a holding company for the purpose of holding shares in one or more corporations only if:

a) the corporation is established by the municipality or the municipality and one or more other municipalities;

b) the articles of incorporation of the corporation restrict the ownership of any and all voting and non-voting shares in the corporation to the municipality; and

c) the articles of incorporation of the corporation restrict the powers of the corporation to those necessary to acquire, hold, dispose of and otherwise deal with, shares of one or more corporations established under any Act by the municipalities.

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PROCESS TO CREATE DEVCO/HOLDCO

• City shall adopt a business case study before it establishes a corporation.

• Shall consult with the public about the proposal to establish a corporation.

• Shall adopt and maintain policies on asset transfers to corporate (this tends to be non-specific and high-level)

• If an asset to be transferred has received Province of Ontario funding, the City shall give notice of the proposal to transfer to every minister that made all or part of the contribution and the city may transfer the asset if one of the following conditions are met:

a) 6 months have passed and there is no response; b) province advices it accepts valuation and possible repayment; c) province rejects valuation, provides its own and a requirement for repayment; or d) province releases its interest in the assets or proceeds of transfer.

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GOVERNANCE OF HOLDCO/DEVCO • As stated, key governance objective is to create uniform policies and

business direction with one point of contact for the City.

• Holdco could have a professional and independent board that establishes policies and direction to any corporate subsidiary.

• Holdco board members could be members of the boards of subsidiaries to ensure consistency of polices.

• Subject to any shareholder direction, Holdco would develop investment thresholds and risk protocols based on sound business best practices for business analysis and to investigate and assess opportunities.

• Holdco board and executive would develop business initiatives and proposals for consideration by the City.

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BEDC Governance and Timeline • Feb 27 - Council Update • Mar 4 - BEDC Board Meeting Endorsement of Ph 1 ,

Ph.2 • Feb 27 to Apr 1 – Establishment of Ph 1 with Ph 2

business case ready for City legal Review & Council Approval

• Apr 8 – BEDC Board Update • Apr 15 – Council Meeting – Approval of Phase 2 • May 6 – BEDC Board meeting / prep for AGM • May 26 week of, Final approval to Incorporate • May 29 – BEDC AGM

Q&A

1. Brown Field Community Improvement Plan Status Completed in November 2009

Summary • Work towards developing a brown field community improvement plan was completed in 2009.

• The program has not been implemented.

2. Employment Lands Study - Phase 1 Status Completed April 29, 2011

Summary • Burlington has 78 vacant land parcels, representing 314 hectares of land

• Findings and Recommendations on pages 29-31 of report

• Recommendations: o No employment lands should

be converted to residential purposes, except in a compatibility of access situation.

o Maintain supply of employment lands.

o Complete next phase of employment land review

3. Halton’s Best Planning Estimates (2011-2031) Status Completed June 30, 2011

Summary • Halton Region’s Planning Department predicts that Burlington will add 9,693 employees between 2011 and 2031.

Significance • These numbers are well below BEDC’s employment projections and intensification targets.

4. North Service Road Business Case Status Case completed 2012; actions

in progress

Summary • An assessment of the development potential and financial implications of developing the North Service Road market, including a recommended strategy.

5. Bronte Business Case Status Case completed 2012

Summary • An assessment of the development potential and financial implications of developing Bronte Meadows

6. Employment Lands Operational Plan Status Completed September 14, 2012

Summary • The shortage of “shovel ready” employment lands may have a negative impact on the city’s tax revenues.

• Non-residential tax levy sources accounts for 25% of the tax revenues collected.

• Low assessment growth may result in the need for continual tax increases over the mid to long term.

• Increasing the city’s non-residential tax levy revenues by 2% will result in an additional $617,000 per year (or $2.3 million per year in total non-residential tax levy collected inclusive of Region and Board).

• An aggressive employment land strategy is required to ensure long term sustainability of the city.

Recommendation • BEDC requests that Council direct staff to consider

this approach and objectives as part of the criteria for developing an employment lands policy as it completes Phase II of the Employment Lands review.

7. Employment Lands Study - Phase 2 Status Draft Completed November 26, 2012

Final to be completed in Q1 2014

Summary Draft Recommendations: • Strengthen the policy framework to fully utilize the

employment generation and economic potential of the employment lands

• Build a strategy to promote downtown office development • Leverage existing assets and work closely with BEDC to build a

proactive approach to economic development. • Implement brown field redevelopment program. • Work with the Region of Halton to track alignment of growth

with Best Planning Estimates. • Develop a phasing strategy for the City’s un-serviced lands. • Consider preparing community improvement plans for some

employment areas. • Consider developing secondary plans for larger greenfield

areas. • Investigate opportunities for limiting the amount or type of

institutional uses on serviced employment lands. • Prepare a comprehensive strategy for employment land

intensification. • Continue dialog with local utilities.

8. Update on Employment Lands Presentation Status Completed October 30, 2013

Key Findings Summary of work that has been completed and is underway at BEDC. Next Steps: • Assessment of Servicing

Requirements - Underway • Engage Stakeholders in New

Approaches • Engage Site Owners • Developing/Refining Development

Concepts and Business Cases • Initial Prosperity Corridor Marketing • New Development Corporation

Structure

9. Prosperity Corridor One Pagers Status Completed 2013

Summary • An assessment the properties with development potential (vacant, severance, intensification) in the Prosperity Corridor.

• Rates properties based on their impact and ease of development.

10. MHPM Consulting – DeGroote/Voortman Status Case completed 2013

Summary • An assessment of the development potential for the DeGroote/Voortman employment nodes

• Identified locations of other potential employment nodes

11. Halton Non Residential Tax Competitiveness Analysis - Cost Competitiveness Chapter

Status Draft Completed October 17, 2013

Summary • Provided annualized costs for developments in: o Industrial Manufacturing Multi-tenant condo Distribution/Logistics

o Office • Burlington has average or

above average costs for the above forms of development.

12. Dillon Consulting - High Level Serving Review Status Draft Completed December

2013

Summary • Identifies the servicing potential of properties identified in the property inventory (water, wastewater, storm water, telecommunications, gas, hydro, and a high level commentary regarding transportation network).

13. Planning Partnership – Waterdown/Plains Rd.

Status In Progress

Summary • To prepare 5 development concept options for Plains---Waterdown Development

• The development concepts will explore siting, massing and parking configurations consistent with current best practices in planning and urban design, including potential GFA/unit yields for each option.

14. Property Inventory Status Work in Progress

Summary Identifies 167 sites across the city that have development potential (vacant, severance, or intensification). Includes information on: • Zoning • Total Parcel Area • Subject Area • Development Potential • Existing Use • Proposed Built Form • GFA (Existing, Potential, and Incremental) • Employment (Existing, Potential, and

Incremental) • Current Value Assessment (CVA) • Current Property Ownership The property inventory was used to: • Build Update on Employment Lands (#8) • Provide input for Dillon Consulting’s High

Level Serving Review (#12)

15. Downtown Development Potential Status In Progress – Draft Completed

Summary • Assessment of the sites in the downtown that are likely to be developed in the short (next 5 yrs), medium (6-20 yrs), and long term (20 + yrs)

• Includes information on: o Number of units o Potential Office and Retail

GFA o Potential employees

16. Parking Lot Studies (MHPM, Lots 3, 7 & 8)

Status In Progress

Summary • Prepare site information packages for lots 3,4,5,7, and 8 • Provide ESA phase one for Lots 3, 5, 7, and 8 • Geotechnical surveys of Lots 3, 5 ,7,and 8. • Provide conceptual massing options for Lot 3, 5, 7, 8

including magnitude estimates for costs of construction for the preferred option on each Lot.

17. Parking Lot Studies (Deloitte, Lots 4 & 5)

Status In Progress

Summary • MHPM to retain Deloitte to provide a financial feasibility analysis for lots 4 & 5, including: o Analyze the site and define employment options o Review market conditions o Prepare a pro-forma financial analysis o Assess potential economic, fiscal, and demographic

impacts o Evaluate options and make recommendations.

18. Mobility Hubs Opportunities and Constraints Status In Progress

Summary • Assessment of opportunities and constraints associated with developing Burlington’s four mobility hubs (Burlington, Aldershot, and Appleby GO stations, and Downtown)

• Includes draft zoning for lands near the mobility hubs.

Examples of Real Estate Targets For Transfer ~$100MMof City Property

1. Parking Lots 3, 4,5,7,8 2. Locust Street Parking Structure and Land 3. Parking Reserve Fund to buy Village Square • In addition to the current ~$1M Operating Budget

from the City, We will leverage the initial properties value to create seed capital via Private Equity or Bank Debt to acquire 3rd Party Assets.

Dividend Targets to be determined in Business Case

55+ Priority Employment Sites

Employment Zone Net Hectares Development Potential

Full Jobs GFA (m2) 40 jobs/ha 50 jobs/ha 60 jobs/ha

407 Corridor 73.3 2,932 3,664 4,397 7,297 282,933

Tremaine/Dundas 21.9 816 816 816 816 22,300

Bronte Meadows 72.3 2,892 3,615 4,338 6,852 286,444

Prosperity Corridor 93.9 3,754 4,693 5,632 8,623 344,439

QEW Central 1.8 72 90 108 247 7,486

403 West 28.0 1,119 1,399 1,679 4,566 96,753

Downtown - 1,500 1,500 1,500 1,500 29,360

Totals 291.1 13,085 15,777 18,469 29,902 1,069,714

All Employment Sites and GFA

Employment Zone Net Hectares Development Potential

Full Jobs GFA (m2) 40 jobs/ha 50 jobs/ha 60 jobs/ha

407 Corridor 73.3 2,932 3,664 4,397 7,297 282,933

Tremaine/Dundas 21.9 816 816 816 816 22,300

Bronte Meadows 72.3 2,892 3,615 4,338 6,852 286,444

Prosperity Corridor 265.9 10,635 13,294 15,953 24,557 847,725

QEW Central 22.3 891 1,114 1,336 3,807 42,008

403 West 126.3 5,052 6,315 7,579 16,450 414,814

Downtown - 1,500 1,500 1,500 1,500 29,360

Totals 581.9 24,718 30,318 35,918 61,279 1,925,583

NEW BEDC Incorporation Project PlanName Duratistart finish pred Resource nApproval of the Board for the Governance Documents necessary to incorporate 3-Feb 15-Apr Gerry Sma Present Revised BEDC SHAREHOLDER DIRECTION for Board Approval Present Revised BEDC BOARD OF DIRECTORS POLICIES for Discussion and Approval Present BEDC BY-LAWS for Discussion and ApprovalSTAKEHOLDER DISCUSSIONS and Whitepaper on Insights 3-Feb 15-Apr Patrick Sug Developers Council Members Key City Employees BankersRebranding BEDC to Reflect new Mandate 3-Feb 1-Apr Mary Vale Brand Positioning Statement Logos, Colors, tagline, etc.Organizational Design 5-Jan 30-Jun Ruta Staus CEO Job Description Hired Cons CEO Search Board Selection Process Organizational Structure Job Descriptions Fill out Rest of PositionCouncil Approval for Incorporating New BEDC 4-Feb 15-Apr Patrick Sug Planning meeting for April council Approval to Incorporate and Capitalize the New BEDC 21-FebReal Estate Activity 5-Feb 15-Apr Scott Stew Business Case for Transferring Locust Street Parking Structure, Lots 3,4,5,7,8 to BEDC Hired Brok Negotiating for the Purchase of Village SquareFunding Activity for the BEDC 5-Feb 15-Apr Jeff Fieldi Confirming BEDC Budget for 2014 9-Feb Business Case for the NEW BEDC to take over the City's Parking Reserve Fund 5-Feb 15-Apr Business Case for the NEW BEDC to take over Locust Parking Structure and Lots 3,4,5,7,8 Identify ABL sources for leveraging acquired properties for Acquistion Cash 3-Feb 15-Apr Patrick SugBusiness Process Design 5-Feb Process to assess properties to transfer from City to NEW BEDCDeveloping NEW BEDC Expenses and Providing Monthly Updates 4-Feb Patrick Sug MD Costs Legal Costs