Skip to content

Universities now economics 101

Responsible for 2,000 direct and indirect jobs, the school is an important economic engine in the community and is proving a catalyst for new development both on surrounding properties and throughout the city.

Responsible for 2,000 direct and indirect jobs, the school is an important economic engine in the community and is proving a catalyst for new development both on surrounding properties and throughout the city.

A library and learning centre is being built on campus, representing a $32 million investment, while adjacent properties are tagged for a high-tech corridor.
“We’ve seen startups out of the high-tech sector and people coming out of the programs wanting to work and open up their own businesses. It’s a very entrepreneurial spirit,” said Dan Sulz, executive director of Venture Kamloops, the city’s economic development division. “The biggest impact the university has had is it’s smoothed out or diversified the economy in Kamloops.”

Kamloops chief administrative officer Randy Diehl said the city recognized Cariboo College’s role as an economic driver of the community and it factored into the push for the school’s designation as a university following the recessions of the 1980s and 1990s. Designated University College of the Cariboo in 1995, the school was recognized as having the potential to diversify the local economy.

“The university was a key part of that strategy of bringing other sectors to the community that would bring a balance should the resource sector suffer,”

Diehl said. “This most recent recession we’ve gone through, worldwide, nationally and provincially, demonstrates … that the theory works. [Previously] we would have been devastated because we were so reliant on the resource sector.”

It’s a similar story elsewhere in the province.

Spin-off spending

Prince George is pinning hopes for the revitalization of its downtown core on the University of Northern B.C. (UNBC) establishing a proposed wood innovation design centre on the current site of the Prince George Hotel.

On Vancouver Island, Malaspina College has become Vancouver Island University (VIU), contributing to the renewal of the former Harewood mining community on the city’s south side as the University District.

VIU is embarking on a $250 million building program that will expand the main university campus with science, health and sporting centres as well as a central building providing office space and classrooms. Meanwhile, projects such as the Deep Bay field station are raising VIU’s profile (and creating employment opportunities) outside Nanaimo.

While the funding arrangements have yet to be worked out – Ric Kelm, executive director, facility services and campus development, expects government funding to play a large role, though Malaspina pursued several projects with a significant amount of private funding – the projects stand to transform Harewood.

“The stigma of living in the area is gone,” said Kelm, who was raised in Surrey. “When you have 7,000 or 8,000 people concentrated here, there’s a lot of economic spinoffs.”

But it’s not just the school looking for money.

Universities create opportunities in communities but schools also increase demands for municipal services such as water, sewage and transit. Universities don’t pay taxes, and the province doesn’t compensate municipalities hosting the new schools with grants in lieu of taxes, as it does for the University of British Columbia (UBC), Simon Fraser University and UNBC.

“We’re not trying to create any challenge or difficulty for [VIU] when we pursue the government for what we feel is our share and our fair share of compensation for the university,” Nanaimo Mayor John Ruttan said. “What we are trying to find out is whether the province of B.C. is prepared to pay the City of Nanaimo for having the university here much as it does in Vancouver for Simon Fraser and UBC, as it does in Victoria for the University of Victoria and in Prince George for the University of Northern B.C. These communities are receiving compensation in lieu of taxes for those university sites that are within their district or area. We are of the opinion that since VIU has now achieved university status, that the playing field should be levelled.”

No property taxes

Similarly, Keith Grayston, director of financial services for Kelowna, where UBC Okanagan is nearing the end of a $300 million construction program, says the fact the university doesn’t pay taxes puts an added burden on Kelowna residents for the privilege of having a university.

“That’s one of the things we need to deal with the province on,” he said. “We can only hope.”

But neither Ruttan nor Grayston regret the presence of the universities in their communities.

“There’s a huge economic benefit. I can’t tell you in dollars and cents what it is, but I’m sure the [benefits] would be equal to and maybe slightly more than what it costs the city to operate it,” Ruttan said.

UBC Okanagan, for its part, boosts Kelowna’s competitiveness.

“It helps to provide an image and an atmosphere to the community that has been very valuable,” Grayston said. “Kelowna is a draw to [people], knowing that there is a university here.”

The economic impact of a university may be as much as 10 times its operating budget, if a study conducted for UBC Okanagan is indicative.

The school has a $100 million annual operating budget that finds its way back into the community through the school’s purchasing, home-buying by the school’s staff (who account for 1 per cent of the local labour force) and students, 60 per cent of whom arrive from outside the Okanagan. The cumulative contribution to the local economy is pegged at $1 billion annually.

Proponents note that it would take a much stronger resource sector – creating a new pulp mill or a large mine, for example – to generate similar economic benefits. Some argue that the tradeoff is a greater reliance on government, not the private sector, which may not be sustainable.

However Doug Owram, deputy vice-chancellor and principal of UBC Okanagan, said the school also gives students exposure to local employment opportunities, potentially feeding into the labour force. This is the vision for the school’s medical program, which is modelled on a similar program in Prince George that has seen health professionals stay in the local community.

“They are finding that they are holding some of their doctors,” Owram said.

But for any small centre competing with major centres to attract skilled workers, a university helps. The small college towns of the U.S. are cases in point; in B.C., the importance of universities to ascendant cities is becoming clear.

“Getting to critical mass is tricky,” Owram said. “What you need in part is a university. It doesn’t mean a university will solve the problem but if you don’t have a university it’s going to be pretty hard to make it happen.”

Western Investor

August, 2010