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Here's the best Canadian city to start a small business in (no, it's not Toronto or Waterloo)

Toronto, Vancouver, Calgary and Montreal don't even make it into Canada's 10 most entrepreneurial cities' list

By Ted Mallett

Published in the Financial Post on April 3, 2019

Cities are humankind’s greatest invention, according to Harvard economics professor Edward Glaeser. In his book Triumph of the City, he credits them for making us richer, smarter, greener, healthier and happier. Some of those adjectives may be surprising because urban life can also include grime, poverty and decay, but on deeper reflection he is right. The bringing together of people, their energy and ideas have allowed for societies and economies to develop far more than had populations remained spread out and isolated.

It is not that this invention needed conscious acts because, as social creatures, people seem to naturally cluster around mutual interests. The common thread, even among communities of vastly different sizes, is the presence of entrepreneurial activity. No city could exist or flourish without people successfully pursuing business opportunities.

This is the reason CFIB takes a regular look at Canada’s urban communities and how well they mesh with the interests of local business owners. Seeking which ones work best, this year we assessed Canada’s 125 largest urban centres and compared them on 13 metrics of self-employment demographics, small business sentiment and local tax and regulatory policy.

There is no single factor that makes a community more entrepreneurial than the rest and these influences can ebb and flow over time with the economy, but looking at the full range, we again see resource regions in the North and Western Canada high on the list along with mid-size regional centres in Central Canada.

Top ranking cities include Whitehorse, Winkler, Man., and Grande Prairie, Alta. Further east, Victoriaville, Rimouski, Rivière-du-Loup — all in Quebec — and Collingwood, Ont., also rank high. Large urban areas tend to finish farther down the list, but the best in that group include Kelowna, B.C., Sherbrooke and Trois-Rivières, Que., and the periphery of communities around Montreal.

Relatively strong economies in Quebec and British Columbia, reflected by healthy income levels, expansion plans and business sentiment, pushed many communities there up the rankings. Mega cities like Montreal, Toronto and Vancouver tend to do well on high levels of self employment, but quite poorly on local tax environments, which reinforces the impression that suburban peripheries are more hospitable places for start-up ventures because they offer the advantages of large markets, but at considerably lower business costs.
Local governments may not be able to influence the economy much, but they do have power over tax and regulatory bylaws. Local property tax is a particular problem for firms of all sizes, but small ones in particular. In the cities of Montreal, Calgary and Vancouver, for example, municipal property taxes on commercial land and buildings are more than four times higher than on equivalently valued residential properties.

Studies looking at the range and level of city services consumed find that residents receive $2 in services for every $1 in property tax paid while businesses receive $1 in services for every $2 paid. Taxes on industrial property are even steeper. In Ontario, it is not so much city governments, but the provincial government that is the bigger devil in the way it has loaded education property taxes on to businesses—in some cities by almost a seven-to-one basis.

At a time of high profile business downsizing across the country, low productivity growth and stalled capital investment, it is surprising and disappointing that more eyes have not been cast towards the role governments play in the local economic picture.

Cities succeed only if enough people who risk their own capital, time and effort believe it is worthwhile to make a gamble on their futures. Making it expensive to do so or setting up time-consuming approval processes will ultimately work against the broad interests of the community. We celebrate and congratulate the communities that appear to be having the most success in supporting entrepreneurial cultures. We recognize, however, that much more can be done.

Ted Mallett is chief economist at the Canadian Federation of Independent Business

April 3, 2019

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