The Role of Planning and the Competitive Context

The restructuring of the regional economy is driven by freer markets and a globalizing economy, which place intense competitive pressures on GGH firms. As the GGH economy shifts toward knowledge-intensive activities, the sources of competitiveness for regional firms have changed too.

At the beginning of the industrial era, firms (and the cities in which they were established) benefited from being located near water – for transportation or as a power source. As transportation and other technologies advanced and markets grew, proximity to railroads and then highways became key sources of competitiveness for firms and cities. At the same time, industries were protected from competition by high tariffs, a branch plant economy prevailed in Canada, and both markets and production tended to be more localized.

Today, highway access and cheap land are no longer the main locational criteria for many firms, especially those in the growing knowledge economy sector. Instead, the sources of competitiveness include access to skilled labour, ideas, and knowledge; the ability to innovate; increases in productivity; and new ways of organizing the production of goods and services. In making investment decisions, companies seek locations that offer the combination of inputs that optimizes their competitiveness and productivity, for example, access to a specific skill set, markets, or related suppliers.

In a global economy, investment and skills are highly mobile. The GGH thus faces intense competition from other city-regions in attracting investment in new production facilities or corporate offices. In this context, certain characteristics of the physical environments of city-regions may support or hinder the competitiveness of business and regional prosperity.

The following discussion outlines some of the ways that planning can contribute to economic development in an emerging knowledge economy.

Sources of competitiveness in the knowledge economy

Innovation and skilled labour: The creation of new or improved products – or new or improved means of producing them – is essential to the growth of restructuring economies like that of the GGH. Innovation and the skilled labour that drives it are increasingly central to an economy based on high value-added, knowledge-intensive activities.

Productivity: Usually measured in terms of output per worker, high productivity is important to firms’ ability to compete globally, attract investment to the region, and sustain high wages and a high standard of living. At present, the GGH is characterized by declining productivity: the Toronto region was recently ranked last out of 12 North American peer regions on this factor of competitiveness (Toronto Region Board of Trade, 2014).

Flexibility: Firms can gain a competitive edge by their ability to adapt their products or production processes rapidly to changing market demand.

Network production models: At the start of the last century, all aspects of production were often contained under one roof. Today, production of goods and services typically occurs through inter- and intra-firm networks of various kinds, in which different stages of production are undertaken by specialist establishments.

Clusters: “Clusters” are spatial concentrations of firms that benefit from shared resources, skills, knowledge flows, and collaboration. A recent study identified 56 clusters in the GGH (Spencer, 2014). The competitiveness of key clusters has been identified as essential to the economic future of the region (Toronto Region Board of Trade, 2014).

Planning for production environments that support competitiveness

Different types of economic activities have different requirements of the urban environments in which they operate. These environments include what are typically called “employment areas” – that is, single-use suburban industrial and office parks – as well as downtowns and mixed-use, older urban areas. (In this report we call all urban environments in which core employment activities take place “production environments.”)

Certain qualities of cities have been identified by researchers such as Florida (2002) and Luis (2009) as essential to attracting and retaining mobile skilled labour, including safety, livability, ease of movement, and cultural life. Workers in knowledge-intensive industries in particular are increasingly demanding work environments that offer mixed uses, local meeting places, a range of services, and accessibility without the need to use a car for all travel. These characteristics are increasingly important elements in the competitiveness of a city-region.

As well, innovation is increasingly understood as a collaborative, open process that draws on the density, diversity, and specialization of firms, skilled workers, and other resources found in cities. Research points to the importance of informal social networks, chance encounters, and a walkable urban environment in innovation related to arts, culture, and design, for example (Currid and Connelly, 2008). Production environments that support open innovation tend to be those that cluster different types of firms, institutions, amenities, and services, and provide easy accessibility and a walkable environment (see, for example, Katz and Wagner, 2014).

Lastly, networks and clusters benefit from production environments that support the linkages and flows of intermediate goods between firms, and the co-location of connected firms, including manufacturing, business services, logistics, and transport, and, increasingly research facilities, universities, or community colleges.

Current planning policy, land use regulation, and urban design, however, do not sufficiently take the changing needs of business into account. For example, planning and zoning restrictions can prevent the co-location of connected firms. Official Plans and zoning often mandate the separation of different types of employment uses. Suburban employment areas in particular tend to be low-density and single-use: industrial activities are relegated to specific areas, while office uses are segregated into office parks.

Cluster- and innovation-friendly urban environments call for land use frameworks that permit co-location of connected but different activities, such as offices, research labs, light manufacturing, education, or business services. They also need to support greater flexibility for firms to adapt to changing market conditions, that is, to expand, contract, or modify their activities.

As well, the quality, character, and design of production environments are increasingly important, especially for knowledge-intensive industries. In the GGH, planners and developers have paid little attention to urban design or placemaking in employment areas, even in the “planned” suburban office and “prestige” business parks.

Planning for a regional structure that supports mobility

One of the major competitive advantages of a region as large as the GGH is that the labour market supports highly specialized, skilled, productive workers. But businesses need access to workers with the needed skills. And workers need to be able to get to and from jobs within the confines of a workday. A reasonable commute time is essential. Intra-regional mobility is central to the efficient functioning of the regional labour market and productivity.

When a region becomes congested and lacks transit alternatives, the regional labour market becomes fragmented and operates less efficiently, with potential productivity losses. Recent research shows that transit supports the efficient matching of jobs with skills, resulting in productivity gains.[1]

The primary implication here is that planning should foster a regional structure that supports the significant transit investment contemplated by the Province in The Big Move[2] and other planned investments.

Planning for an efficient, cost-effective urban form

Municipal service costs are an input cost to businesses, affecting their bottom line and competitiveness. They take the form of user fees, utility rates, or property taxes. As well, development charges are generally incorporated into property prices, and absorbed by businesses either in purchase prices or commercial rents.

Efficient development patterns have been demonstrated to incur significantly lower infrastructure and servicing costs – in the range of 20% to 60% lower.[3] These lower costs could be reflected in utility rates, user fees, and property taxes – lowering input costs for business and supporting their competitiveness.[4]

Efficient urban form is achieved through both intensification and denser greenfield development. The Growth Plan does not have specific policies in place to address the intensification of employment lands. Greenfield densification is addressed through the greenfield density targets contained in the Plan, which apply to the sum of population and employment, but not to employment specifically.

Maximizing the benefits of major public investments

There is also an important opportunity to capitalize fully on the potential of existing regional assets and future investments. This means fully leveraging the economic and planning potential of provincial investments in health care facilities, higher education facilities, or courthouses, as well as local investments in community, cultural, and recreation facilities.

These facilities can play a broader role in economic development, area regeneration, or catalyzing development in key locations, such as transit station areas or urban growth centres.

For example, investments in health care facilities are being used elsewhere to kick-start urban regeneration and local economic development, through strategies such as buy-local procurement programs or linking investments to local workforce development (Initiative for a Competitive Inner City, n.d.). Major institutional facilities can stimulate nearby development, for example, in the case of hospitals, with hotels, shops and restaurants, special housing (e.g., nurses’ residences), or ancillary offices or research facilities. Universities, research institutes, or large firms are being used in cities like Boston and Philadelphia to anchor innovation districts – areas that contain a mix of uses and amenities, and are designed to support open innovation (Katz and Wagner, 2014).

Too often, these related uses and synergies are not planned for at the outset, the design of the facilities and urban contexts and the planning frameworks do not support them, and potential positive spinoffs are unrealized. The Growth Plan could ensure that major investments are strategically located to fully leverage their broader economic and urban development potential, and that integrated planning, design, and economic development frameworks are put in place.

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The above discussion has demonstrated some of the many important linkages between planning and competitiveness, and the potential for the Growth Plan to play a key role in supporting regional competitiveness and prosperity. The connection is not limited to simply ensuring a supply of land for future businesses that is the major linkage currently highlighted in the Growth Plan.

CURRENT PLANNING AND ZONING RESTRICTIONS CAN PREVENT THE CO-LOCATION OF CONNECTED FIRMS.

 

[1] These gains do not tend to be accounted for when assessing the economic benefits of transit. See for example, Chatman and Noland (2012).

[2] The Big Move is the Province of Ontario’s transit plan that complements the Growth Plan.

[3] A large body of research has established that a more compact, efficient urban form can reduce the capital and operating costs of infrastructure by 20% to 60% – depending on the type of infrastructure and the magnitude of the shift in development pattern; see, for example, Burchell et al. (1998) and Linner et al. (1999). A recent report that reviewed the impact of urban form on infrastructure costs across a range of American cities, for example, found that more compact urban forms reduce up-front capital costs by one-third, and that on average, compact development returns 10 times more tax revenue per acre than conventional suburban development (Smart Growth America, 2013).

[4] This is, of course, assuming that development charges, user fees, and property tax rates are structured in a way that is accurate and that actually reflects cost factors – like usage, location, and density – avoiding inadvertent cross-subsidies.