Comment 38313

By jonathan dalton (registered) | Posted February 22, 2010 at 10:51:23

Someone posted this on the Canada Bread post:

This announcement of 300 jobs and millions in taxes paid is half good and half bad but the possibility of a fitness club downtown opening on Augusta (believe it when you see it - press releases are easy - see your boy Harry) employing about 97% less people is a great thing?

A new development downtown is significant because it produces benefits disproportionate to its size. Compared to greenfield developments which replace nothing with revenue, any downtown greyfield development replaces an economic drain with revenue. This is because of externalities. Vacant land downtown perpetuates a cycle of disinvestment in which customers are repelled from the area, and businesses suffer further. A reversal of that cycle will bring customers to the new facility and also to those surrounding it. Furthermore as public perception of the area increases so will everyone's customer base. This synergetic effect is the basis of functional urban economics - see Ryan's many essays on the Creative City theme. A new fitness club may only be few employees, but the money it makes, as well as what nearby establishments bring in as a result, is money that stays in the community.

Contrast that scenario with a greenfield business park. That land in its former incarnanation was not an economic drain - more likely it was a net producer in the form of food. The city has already invested in development and infrastructure, in this case hundreds of millions. A bread factory does not work in synergy with surrounding businesses to bring wealth into the community. The only revenue we can expect is the taxes they pay, while profits are funneled elsewhere. Aside from potential business from outside contracting of engineering and trades support, the only positive spinoff we will see is low end food service, again paying low tax rates and funnelling profits elsewhere.

I'm confident that even for a few employees, the total economic performance of anything good built on a downtown parking lot will exceed that of a bread factory built on farmland.

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