Changes to development charges are coming, but what will they look like? What can council do? What can’t it do? The mayor and councillors will get together in a few weeks in order to learn all about it. Here’s the preview…
Special Council Workshop – Development Charges Study Kick-off and Policy Update:
What’s a Development Charge? A municipality can advance development charges under the Development Charges Act. It’s a way of recovering capital costs associated with growth be it residential, commercial or industrial by asking developers to kick in the cash, on top of the other construction costs, to cover the creation of roads, sewers, streetlights, and watermains. About half of Ontario’s municipalities use DCs in this way.
What’s a capital cost? A capital cost can be the acquisition of land, the improvement of land, or the lease, construction, or renovation of an existing building. They can also be used for equipment, library materials, and vehicles and equipment with an average life of six years or more. The act also demands a 10 per cent reduction of capital costs on all services except for transit, water, wastewater, stormwater, roads, and emergency services.
What do DCs cover? The City can put development charges toward the funding of transit, parking, recreation, libraries, stormwater, wasterwater, water services, health and emergency services. Among the changes to the act, DCs can now be used for waste diversion too.
What can’t DCs cover? Cultural centres, museums, tourism facilities, hospitals, landfills, the acquisition of parkland, and new municipal administration facilities like a city hall.
When was the Development Charges Act last changed? Ontario has been working with the current DCA since it was passed in 1997, though it went into effect in September 1999. The act was last amended in January 2016 when the Province added transit services, and allowed for background studies to provide for asset management plans. There was also a new mandate for City Treasurers to provide an annual reporting requirement as well as some general “housekeeping” changes to the Act. This impacts Guelph in a couple of ways as an asset management plan was required to ensure the financial stability for infrastructure, and the City must consider “Area Rating” as part of the background study.
Why do a background study? To inform the Local Service Policy (LSP) and perhaps broaden the coverage of local services related to a planned subdivision or surrounding area. This could include collector and arterial roads, intersection improvements and traffic signals, streetlights and sidewalks, bike routes/lanes/paths, Trails/Walkways, Noise Abatement Measures, and Land dedications/easements.
What’s Area Rating? Presently, the City’s DCs are handled in a manner that’s “municipality-wide”, meaning that the City sees a need and can allocate capital resources to fill it from one big pot. An Area Rating basically means that DCs raised from projects in the south end, has to be spent in the south end. That may sound reasonable, but if there’s more construction in one area of the city over another, then that area will get more infrastructure investment even though there may be a desperate need elsewhere. A lot of municipalities do not use Area Ratings including Toronto, Kingston and Windsor, but Waterloo Region uses area rating on transit, libraries and waste collection. Hamilton is a municipality that made the switch to Area Rating recently, and there has been some controversy.
Are there exemptions to the Development Charges Act? In Guelph, there are a few. Places of worship and cemeteries are exempt under the Assessment Act, for example. Any university-related land, buildings or structures, are also exempt along with non-residential farm buildings built for farm use and public hospitals receiving aid under the Public Hospitals Act.
Are there limits to how much can be charged for DCs? Yes, it’s called the Service Standard Calculation. Going back to the changes made to the Act in 1997, the Service Standard is an average of charges levied in the past 10 years. That can mean lower collection levels if there isn’t a lot of construction going on.
When are DCs collected? Normally when the building permit is issued. Money for “Hard Services” like water or roads are often committed in advanced of a development, while other spending, “Soft Services” come after a development is completed and occupied. Of course, municipalities may have to borrow to start construction of the “Hard Services” before money from the DCs becomes available.
So what does council have to do? Well, they have to consider the LSP and the Area Rating as well as Growth Forecast Assumptions, how to modify the existing DCs, and anything else that comes to mind.
So what happens next? The council will receive a report to consider Area Rating in March, which is around the same time that the first meeting with stakeholders takes place. There will be two other stakeholder meetings in May and November, and two other council workshops in May and December, that last one, presumably, with the new council. The draft background study and bylaw will be prepared by the early fall and released to the public in November. The public meeting will take place in January 2019 and that finished bylaw will come before council in February 2019.