Mixed reviews on VW benefits

The economic benefits beginning to flow to Central Elgin (CE) from Volkswagen-PowerCo’s plans to build an electric vehicle battery plant in St. Thomas by 2027 have received mixed reviews.

A series of online Facebook posts criticize the compensation package that a Provincial facilitator has awarded CE for the city’s March 13, 2023 annexation of land to develop St. Thomas’ 1,500-acre Yarmouth Yards Industrial Park to accommodate the VW gigafactory. The plant is forecast to create some 3,000 direct and 30,000 indirect jobs in the region.

The compensation package was announced by CE Mayor Andrew Sloan and St. Thomas Mayor Joe Preston, alongside Elgin-Middlesex-London MPP Rob Flack, associate minister of housing, at a media conference on April 19. Agreement between the mayors was reached after a year of negotiations overseen by a provincial facilitator.

The deal includes a $10 million up-front payment to CE, an additional $5 million payment over five years, plus up to $70 million in future rights to 7,700 cubic metres a day in wastewater treatment capacity.

The capacity rights – to be managed at St. Thomas’ Sunset Drive wastewater plant, and a proposed $250 million plant whose location is still to be determined – are viewed as necessary components for future industrial and residential expansion in CE.

About 1,700 cubic metres of that wastewater capacity is to be linked to plans to redevelop the former St. Thomas Psychiatric Hospital on Sunset Drive. Ontario’s recent budget includes a Site Preparation Pilot Program – $99.1 million over three years – to repurpose surplus, Ontario-government-owned sites, including the former St. Thomas Psychiatric Hospital.

“Does anyone understand what the typical cost sharing or compensation for these types of boundary adjustments are in the province of Ontario? I do,” said Lloyd Perrin, former CE Director of Asset Management and Development. In his post on a Facebook page called ‘Accountability for Central Elgin’, Mr. Perrin cites information drawn from a report presented to council prior to his leaving CE in 2023.

“Previous agreements for Brant County-Brantford, Perth County-Stratford, just to name two, was 25 percent tax sharing for taxes received to the municipality that gave up the land,” added Mr. Perrin. “That is in perpetuity. Forever. This cost sharing arrangement has been the standard for the compensation agreements in Ontario for the past 25 years.”

In this case, Mr. Perrin estimates that VW will ultimately pay St. Thomas about $15 million a year in property taxes, with more industrial tenants coming to Yarmouth Yards and paying more taxes on the horizon.

“None of those dollars will go to the benefit of Central Elgin residents,” added Mr. Perrin. “You be the judge if a one-time payment of $15 million is a good deal for CE residents.”

He goes on to explain that VW’s plant will likely drive Elgin County to upgrade a portion of Highbury Avenue, as well as Ron McNeil Line, Wellington Road and Belmont Road.

“It will be funded by every resident in Elgin County, except those that live in St. Thomas because St. Thomas is not part of the county and they don't fund County of Elgin roads,” Mr. Perrin continues, noting CE residents fund 36 percent of the County’s budget.

“So, $15 million might seem like a lot of money, (but) it is nowhere near what the past compensation agreements would generate, and CE residents and County of Elgin residents are now squarely on the hook for massive expenditures going forward,” he said. “As far as the wastewater treatment capacity, the proof will be in the pudding.

“Even if it is $85 million total compensation, CE residents lost out yesterday with this deal,” said Mr. Perrin. “The past compensation agreements in other boundary adjustments provide tax revenue sharing of 24-to-25 percent in perpetuity.

“So when the city is pulling in $30-to-$40 million per year – very conservative estimate – CE will be losing $7.5-to-$10 million a year,” he added. “Grade 5 math tells us that the $85 million that everyone is thinking is great, is a drop in the bucket for what should have come CE’s way if they just did what every other municipality agreed to in the past 25 years in the Province of Ontario.”

In an interview at the media conference, Mayor Sloan addressed concerns like those expressed by Mr. Perrin, while also expressing optimism that the deal with St. Thomas will ultimately benefit his constituents.

“I think the game changer is the wastewater,” said Mayor Sloan. “When we do our projections, if you look at the future water and wastewater rates, to get to where we need to go, they (a Watson and Associates’ analysis) have got a cost in there of tens of millions of dollars. With that cost taken out, the rates are going to go down, but I can’t confirm today what they’re going to be.

“The other piece we’re looking at, on the current (drinking) water debt, we have … two tranches, $2.6 million and $600,000, that are coming up within three years (and) we’ve asked to look at what we can do with that,” he said.

Considering the dynamic environment in which negotiations were conducted, “we had to look at a hybrid (compensation package), which was how do we get something that’s going to pay down the road, without the taxes, and we went to wastewater. I think it’s a good deal. I think it’s never easy.”

Mayor Sloan said the compensation package will not impact the municipality’s 2024 budget and its zero percent tax increase.

“If Central Elgin wins, the county wins,” added Mayor Sloan. “Let’s look at the industrial lands (in CE). Without sewer capacity, St. Thomas’ lands would sell out and ours would be sitting for 10 years. We now have the sewer capacity … So I think through the wastewater, it’s a long-term win for both of us.

“We’re not getting 25 percent of taxes in 25 years, (as suggested in models like Mr. Perrin’s) we’re not getting that,” he said. “Our compensation is wastewater and $15 million.”

Mayor Sloan said community expectations were high. Provincial non-disclosure agreements involving the purchase of property from CE farmers to create Yarmouth Yards fueled sometimes unfounded gossip in the community. Social media fired the debate.

“I can tell you that at the start, it was made very clear that we weren’t sure what deals were made (by other levels of government to attract VW),” said Mayor Sloan. “We’ve all heard anecdotally about $15-(to)-$18 billion from the government …

“We needed to have some costs for today, plus second of all, some way to ensure it was for the long term, and making the remaining industrial lands competitive,” he added. “I think that is the game changer.

“The other piece I think people don’t realize when they would talk about a Toyota deal (in Woodstock) … this (CE) deal is without precedent because the Province legislated it,” Mayor Sloan continued. “They took the land, changed it into St. Thomas after the land had been purchased, so that they could say to Volkswagen, here’s a facility.

“So, we (CE) didn’t have any precedent to say okay, let’s copy the Toyota deal,” he added. “No it didn’t apply. That was one where they said okay, here’s what you’re paying in taxes, in eight years, we’ll share that between the upper and lower tier. Today the sharing for everybody is the wastewater capacity.”

Mayor Preston seemed satisfied with the compensation package.

“Central Elgin can now can rush forward from a growth point of view and a future that looks so much brighter,” he said. “St. Thomas can continue that too. The Province has made this available to all of us.

“The ability for both of us to move forward on housing and on industrial growth gives all of the municipalities within the county the same reason to want to do residential growth in their own markets in order to take advantage, take some revenue from that, take advantage of people living all the way around the industrial growth,” said Mayor Preston. “I don’t see a loss here for anybody. I see nothing but great future growth because of what this group was able to come to today.”

St. Thomas Cr. Steve Wookie said the city is likely to issue a debenture to cover the initial $10 million payment to CE. He calculated that would be reflected in the city’s budget by a $600,000 a year repayment program, or about one percent of property taxation.

“I’m hoping that the citizens of St. Thomas recognize that for the past six years, we’ve been very prudent with our money,” he said. “This year especially, we (the St. Thomas tax rate) were 2.75 per cent, when a lot of municipalities were seven or eight percent. We’re asking the people of St. Thomas to have faith in us that we will make sure that tax increase next year will be reasonable and know that although we’re paying now, there will be massive benefit to us starting very shortly from the (VW) jobs, the tax base, the growth.

“For large industries and anybody else looking at us from the outside, whether it’s in Canada, United States, Europe, or South Korea, I think that they will look at what we’ve done here and say ‘the adults were in the room’,” added Cr. Wookie. “The adults got along and they created an agreement that was not easy, but demonstrates we’ve got our act together.”

Some members of CE council are cautiously optimistic. While CE Cr. Dave Baughman, for example, expressed respect for Mr. Perrin’s assessment, he said history will be the judge.

“He (Mr. Perrin) makes some valid comparisons and I respect his opinion,” said Cr. Baughman. “Every situation has its own complications and challenges.

“The deal we have will be judged by the outcomes it produces,” said Cr. Baughman. “The (former St. Thomas Psychiatric Hospital) land development, and waste water capacity offer us growth potential. How we invest the cash will be an interesting debate.”

CE Cr. Morgaine Halpin said “the value of the wastewater support is the most questionable value in the deal. I'd love to see who ends up paying for St. Thomas' facility. It's great to have use of it, but if the land had never been annexed, we might be not just using the water, but actually owning the plant.

Many people have already reached out to me to point out that there were farms sold for more money than what Central Elgin received,” she said. “That's not lost on me, either.

“I'm concerned that many people seem already to have been told what will be done with this lump sum, as if council has already made promises,” added Cr. Halpin. “We have people saying it will be dumped entirely into curing water and sewage costs. But almost 30 percent of our homes are on septic. Shouldn't they see any benefit? We need to talk about uses for these funds that serve the entire community.”

Joe Konecny, Local Journalism Initiative Reporter, Aylmer Express