Item - 2024.EX11.6

The Executive Committee recommends that:

1. City Council direct the Chief Planner and Executive Director, City Planning, in consultation with the General Manager, Economic Development and Culture and the Chief Financial Officer and Treasurer, to bring forward for City Council’s consideration, targeting the fourth quarter of 2024, a new City-wide Community Improvement Plan for a Financial Incentive Program consisting of development grants, in the form of Tax Increment Equivalent Grants for certain defined uses and Brownfield Remediation Tax Assistance, substantially addressing the policy considerations in the report (January 16, 2024) from the General Manager, Economic Development and Culture, the Interim Chief Planner and Executive Director, City Planning and the Chief Financial Officer and Treasurer, and the program parameters detailed in Attachment 1 to the report (January 16, 2024) from the General Manager, Economic Development and Culture, the Interim Chief Planner and Executive Director, City Planning and the Chief Financial Officer and Treasurer, including with respect to:

i. eligible uses – no eligibility for office space, except when linked to associated industrial buildings and except in limited circumstances within designated Employment Areas as defined in Toronto's Official Plan;

ii. basis for the provision of Tax Increment Equivalent Grants – grant acts as one of several factors contributing to investment decisions, not necessarily the primary decisive factor;

iii. quantum and term of  Tax Increment Equivalent Grants – basic grant equivalent to 60 percent of the municipal tax increment payable over a five-year period;

iv. approval and financial control requirements - all applications to be approved by City Council and considered as a group no less than once per year; provisions to ensure approved projects are built within certain timelines; expiry of the program after 10 years; inclusion of a program budget target or upset limit with flexibility to address exceptional projects or circumstances, etc.;

v. local employment plan requirements; and

vi. mechanisms to support City goals related to sustainability, job quality and access, and community wealth building.

2. Until such time as any new Community Improvement Plan By-law indicated in Recommendation 1 above is approved and in force, City Council direct the General Manager, Economic Development and Culture, the Chief Planner and Executive Director, City Planning and the Chief Financial Officer and Treasurer to bring forward, no less than annually, as a group: (i) for City Council’s information, notice of any Imagination, Manufacturing, Innovation and Technology development grants approved by the General Manager, Economic Development and Culture under their delegated authority for projects meeting all program eligibility requirements and with a construction value of less than $150,000,000; and (ii) for City Council’s approval, any complete applications for Imagination, Manufacturing, Innovation and Technology development grants for projects with a construction value greater than $150,000,000.

3. City Council request the Chief Planner and Executive Director, City Planning, in consultation with the General Manager, Economic Development and Culture, as part of the Office Space Needs Study to explore opportunities to provide financial incentives, policies and other options to support the conversion or adaptation of vacant office space into other non-residential employment uses, including the potential to utilize as a funding source for such efforts savings from lower than forecast Tax Increment Equivalent Grants payments to office developments covered by an Imagination, Manufacturing, Innovation and Technology Program Financial Incentive Agreement experiencing high vacancy rates.

The purpose of this report is to share the findings of a review of the Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program and the results of a Council directed assessment of the program’s Local Employment Requirement points-based pilot.

The review of the Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program considered the City’s planning and economic development priorities and financial position (including directions from the Updated Long-Term Financial Plan); assessed current and anticipated market conditions (especially with respect to office and industrial sector requirements); and includes an independent third-party evaluation of the Program’s performance, costs and benefits to date informed by consultation with stakeholders.

Drawing on the review's findings, this report recommends that Council authorize staff to develop a more targeted and far less costly employment space development incentive to replace the Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program, focused on the development of commercial/industrial space rather than office space, for Council’s consideration, by the fourth quarter of 2024.

Established in 2008, the Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program has been one of the City's principal measures to incent business development and support job retention and growth, complementing land use planning and property tax policies.

The Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program provides incentives in the form of Tax Increment Equivalent Grants to support the new construction or major renovation of buildings in targeted employment sectors and for certain uses throughout Toronto. The Program also includes an added grant element for Brownfield Remediation Tax Assistance. The provision of development incentives through Imagination, Manufacturing, Innovation, and Technology Financial Incentive is enabled by a Community Improvement Plan by-law authorized under Section 28 of the Planning Act.

Typically, projects approved for Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program receive grants over a ten-year period equivalent to 60% of the increased property taxes paid resulting from the new construction or renovation completed through the development.

Since its inception, 74 projects have been approved for Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program (and/or Brownfield Remediation Tax Assistance) development incentives, with a total construction value of approximately $5.9 billion. Together, these projects are forecast to yield $1.3 billion in new incremental property taxes during the 10-year (or with Brownfield Remediation Tax Assistance up to 12 year) term of their applicable Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program Financial Incentive Agreement, while receiving $729 million in grants from the City, resulting in net municipal tax revenue of $571 million. The majority (84%) of grants issued or committed to date through the Imagination, Manufacturing, Innovation, and Technology Financial Incentive Program are for office space developments.