HomeMy WebLinkAboutPD-15-97DN:PD -15.97 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
REPORT
Meeting: General Purpose and Administrative Committee File # /� 2 I. -
Date: Monday, January 20, 1997 Res. #t-40
Report #: PD -15 -97 File #: By -law #
Subject: BILL 98 - DEVELOPMENT CHARGES ACT
Recommendations:
It is respectfully recommended that the General Purpose and Administration
Committee recommend to Council the following:
1. THAT Report PD -15 -97 be received for information.
1. BACKGROUND:
On November 25, 1996, Bill 98 - The Development Charges Act, 1996, (DCA) was
introduced into the Ontario Legislature. Upon receiving Royal Accent in the
spring of 1997, Bill 98 will replace the Development Charges Act enacted in 1989.
2. PURPOSE:
The purpose of this Report is to advise Council of a number of significant
differences between the present and proposed Development Charges Act and to
highlight the potential impacts to the Municipality. A summary table is attached
to provide for easy referencing between the old and new Act.
3. KEY ELEMENTS: THE DEVELOPMENT CHARGES ACT, 1996
The following identifies some of the key elements in the new Development
Charges Act as well as indicating for comparison purposes the current practices
of the Municipality. Comments and observations with respect to the potential
impact of various changes in the new Act are also provided.
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REPORT .D PAGE 2
3.1 Reducing the Scope of Eligible Services
Municipalities will no longer be able to impose development charges for
administrative headquarters (ie: city halls), cultural and entertainment facilities (eg:
art galleries, performing arts centres and museums), hospitals, tourism facilities,
or parkland acquisition. Municipalities may still choose to provide these services,
however, they will be required to use alternative sources of financing to do so.
Development Charges for other services, as prescribed by regulation may also be
prohibited. Until the regulations are released by the Province, a definite list of
"other services" is not available at this time.
In our last development charges study, Staff and Council have been reasonable
in its approach by not charging many items which are now included in the new
Act as ineligible. Of all the ineligible services, only parkland acquisition is
presently a chargeable item under the Municipality's Development Charges By-
law. This item represents the cost of land for any parkland acquisition above and
beyond the neighbourhood parks. For example, the Clarington Official Plan
designates several community park sites in the urban areas of Courtice,
Bowmanville and Newcastle Village to service the future population growth.
Should parkland acquisition become an ineligible service, the Municipality will
have to rely on other sources of funding to acquire parkland. The most likely
scenario will require the Municipality to set aside tax dollars on an annual basis
to accomplish this. The actual dollar impact would not be known until the new
development charges study is completed. However, it should be noted that the
cost for parkland acquisition in our current 10 year capital work (1992 -2001) is
$3.2 million. One can conclude that in order to provide for parkland to
accommodate the new growth, a shortfall of a minimum of $3.2 million would not
be collectable assuming the same requirement of parkland acquisition applied to
the next 10 year period.
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REPORT
The Municipality currently includes a component in the development charges for
animal control facility and vehicles. The new legislation does not specify these
as ineligible charges. However, staff are of the opinion that when the detailed
regulations are released, they will most likely be declared as ineligible. Under the
current development charges 10 year capital program, the Municipality provided
for $164,000. in capital costs to be financed from development charges to provide
these services.
3.2 Co- Payment by Municipality
The new Development Charges Act, 1996 still gives the Municipality the capability
and flexibility to recover the costs of a wide variety of services and facilities
needed by new residents and new businesses. However, growth - related capital
costs for all eligible services will have to be funded from a combination of
development charges revenues and other general municipal revenues. Under the
new act, ten percent (10 %) of growth related capital costs for the following
services must be funded from other general municipal revenue sources:
• water and sewer (including sanitary and storm)
• roads and transit
• waste management
• fire protection and police
• electrical power services
For other eligible services such as park development, libraries, community
centres, the co- payment by the Municipality to finance the capital works is 30 %.
The Municipality's present by -law generally allowed for a minimum of 10%
municipal contribution for hard services except storm sewer which is 100%
developer's cost. For soft services such as library, park development etc., 5% to
10% municipal contribution are used.
The noticeable impact here is the co- payment by the Municipality for soft services
which increases municipal contribution to 30% from our current practice of 5% to
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REPORT O
10 %. The difference is equivalent to about $3.4 million assuming the same
requirements apply in the next 10 year capital works program.
3.3 Calculating the Costs of New Services
Three significant changes are proposed under the new Act:
a) Municipalities will be required to include the unused net capacity of
existing services and facilities already in the community in calculating
development charges. For example, when Courtice Community Centre is
built, a study presumably would be required to determine it's excess
capacity. When that is done, the excess capacity, expressed in number of
persons will have to be accounted for in the calculation in the
determination of the need for the next community centre(s) in the
development charges study. Staff generally agree with the principle
expressed. However, it will be a very onerous exercise to determine
excess capacities for all services.
b) The new Act requires calculations of costs to be based on the average
level of a particular service standard rather than based on the peak service
level during the past ten (10) years. Unlike other municipalities in the
Greater Toronto Area, Clarington chose "average standard" in our last
development charges study. Therefore, this issue is of little concern to
Clarington. However this issue is apparently a major concern to some
municipalities in the Greater Toronto Area which have been singled out by
the Urban Development Institute as having gold - plated standards.
c) Last, but not least, municipalities must reduce the capital cost estimate by
any applicable grants, subsidies or contributions to the municipality. In
addition, should the municipality choose not to charge commercial/
industrial development, the charges that would otherwise be collectable
cannot be passed on to the residential portion in the calculation. For
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REPORT
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example, if a road project is estimated at 1 million dollars, the financing
scenario under the new Act could be as follows:
Total Project Cost $1,000,000.
Less: Municipal contribution from all 100,000.
sources including Provincial Grant
Less: Municipal contribution in lieu of 140,000.
not charging comm /ind. development
Net Cost attributable to 760,000.
Development Charge calculation
Less: Municipal Co- payment 10% 76,000.
Chargeable Amount from Developers $684,000.
4. OTHER IMPORTANT ELEMENTS OF NEW DEVELOPMENT CHARGES ACT
4.1 Background Study
Municipal councils will also have to ensure that a background study is completed
supporting their plans for using development charges to fund new services. As
part of the study, the long term capital and operating costs of any facilities being
considered for development charge financing will have to be examined. Most
municipalities including Clarington have prepared studies prior to adopting
Development Charges By -laws. The New Act now makes it a mandatory
requirement. The detailed study methodology and ground rules will be specified
through subsequent regulations.
In addition, the municipality is also required to prepare an operational study to
determine it's ability to operate the facilities to be built under development
charges. It is noted that a development charge contribution to the municipality's
operating cost is not allowed. We are of the opinion that the operational study
requirement may be too onerous and does not serve any useful purpose.
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REPORT PD-15-97
4.2 Exemption to Industrial Development
The new Act includes new measures to facilitate the expansion of existing
industrial facilities. Most notably, it exempts from development charges any
expansion up to fifty (50 %) percent of the existing gross floor area for industrial
development.
Currently, there are no development charges for industrial and commercial
development in Clarington. When staff commence the Development Charge
Study, this matter will be examined to determine whether or not it's financially
feasible for the Municipality to continue such a practice.
4.3 Reserve Funds
Under the new Act, reserve funds established for facilitates which are no longer
eligible (e.g. parkland acquisition, animal control facilities) must be established as
a separate capital reserve fund and can be used to finance those services for
which the reserve fund was initially established or may be allocated to any eligible
development charge reserve fund (e.g. roads). Clarington currently has
$360,000., and $21,000. in the parkland acquisition and animal control reserve
funds respectively. If, at the end of five years, these funds or whatever amounts
remain, the municipality must transfer such funds to eligible development charge
reserve funds. It therefore appears that the Municipality should exhaust this fund
prior to the 5 year limit or stands to lose it in subsidizing other development
charges reserve funds. In any event, the use of these reserve funds will be
subject to detail review when regulations are made available.
4.4 Credits
Credits issued for services provided in lieu of development charges since 1989
which are owed to developers for services which are no longer eligible must be
refunded.
REPORT PD-15-97 PAGE 7
This provision does not appear to affect Clarington as the Municipality have not
implemented credit system for any developer for any ineligible services.
The new Act also provides for the Municipality to give credit to development
charges (i.e. at a reduced rate) to developers who wish to accelerate
developments by paying for the services which otherwise is the responsibility of
the Municipality. Staff have no difficulty with this provision. If and when a
developer makes such a request, staff will address it on a 'case by case' basis
and report to Council accordingly.
4.5 Debt:
Where a municipality has incurred debt (ie: issued a debenture) relating to eligible
services, the municipality may include the cost of servicing the debt, as permitted
by the new Act. However, only 70% is eligible as the 30% co- payment by the
Municipality is required. As the debenture amount for the Courtice Community
Centre is $1,055,000., the 30% municipal co- payment for the borrowing cost
would be $316,500. which most likely would have to come from general tax
revenue.
4.6 Front End Financing
Front - ending is a method of financing capital works or services whereby a
municipality and a developer agree to accelerate development in an area not
necessarily covered by the municipality's development charges by -law. It permits
the front -end developer to build and /or oversize municipal capital facilities in areas
not yet scheduled for municipal capital outlay and to be reimbursed by benefitting
property owners at a later date. The risk of this type of financing is taken on
entirely by the front -end developer. The changes between the old and the new
Acts are relative minor as related to front -end financing. However, we noted that
the new Act is silent on the issue of co- payment by the Municipality. Would the
Municipality have to contribute 10% and 30% under such arrangement? It is
In
REPORT
obvious that if the 10% - 30% co- payment rule applies, the Municipality should not
be party to any front - ending agreement. We understand the Provincial
Government will clarify this. At this time, it is noted that the new Act has made
front -end financing permissive as opposed to mandatory.
4.7 Timelines
Municipalities will have up to 18 months from the date of proclamation of the new
Act to establish a new development charges by -law. All development charge by-
laws passed under the old legislation will expire no later than 18 months after the
date of proclamation of the new Act.
This transition period will give municipalities time to prepare capital and
operational background studies for development charge by -laws required under
the new Act, adjust their capital forecasts, redeem credits owed to developers if
any, for services which are no longer eligible, and clarify existing debt on facilities
which are no longer eligible. It is important to note that if the new by -law is not
in place in 18 months, the Municipality will not be able to collect any development
charges. The consequence for delay on the part of the Municipality to enact a
new by -law could be enormous.
5. G.T.A. MAYOR - DEVELOPMENT CHARGES TASK FORCE
5.1 At its meeting held on December 6, 1996, the Greater Toronto Area Mayors and
Regional Chairs endorsed the following principles in response to the new
Development Act.
new growth must continue to pay for itself
• municipalities should have the right to establish, but be required to defend,
reasonable, sustainable and cost - effective levels of service and to set the
appropriate development charges to pay for those services
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REPORT •
development charges should be based on reasonably anticipated future
levels of service and expenditures as determined by appropriate underlying
studies
development charge practices inconsistent with the spirit of the legislation
are not supported by municipalities and should be dealt with accordingly
development charge legislation must achieve a high degree of
administrative simplicity which is not apparent in the new legislation
• permissive legislation should enable municipalities to grant exemptions to
development charges rather than legislating exemptions
• there should be an attempt to ensure equity amongst taxpayers so that
those who have had to bear the growth - related costs in the past are not
now having to cross - subsidize further new growth
• any savings that accrue as a result of reductions in development charges
should be passed onto end users
• municipalities are willing to review the issue of service standards and how
best to address any concerns together with the Province and the
development industry
5.2 In addition, the Mayors and Regional Chairs have established a task Force to
articulate the municipal positions for future meetings with the Province and the
Urban Development Institute.
5.3 The Task Force, chaired by mayor D. Cousens of Markham, has met several times
and the three sub - working groups have been working on the details with the goal
of establishing consensus among the Greater Toronto Area municipalities. The
Director of Planning has been working with the Task Force members for the last
few weeks.
5.4 The Task Force will be reporting to the Mayors and the Regional Chairs within the
next couple weeks. The tentative timetable calls for sitting down with the Province
and the Urban Development Institute in late January to discuss the municipal
REPORT NO. 1
position and /or suggestions for changes to the new Development Charges Act.
At the time of writing of this report, the recommendations of the Task Force is still
being formulated. Nevertheless, it is reasonable to assume that the concerns
raised in the Report are common to those of the other Greater Toronto Area
municipalities. The Director will continue to participate in the Task Force works
and will report back to Council in due course.
There is no doubt that the new Development Charges Act will have significant
ramifications to Clarington. The financial impacts discussed in this Report
represent our preliminary observations. Actual financial impact would not be
known until detail regulations are made available and that the new development
charges studies are completed. Further, certain parts of the Act may be changed
depending on the lobbying efforts of the municipalities. Staff will continue to
monitor the matter and convey our concern to the Province through the Greater
Toronto Area Mayor Task Force and will report to Council as events unfold.
Respectfully submitted,
j/ �- `-
Franklin Wu, R.P.P., M.C.I.P.
Director of Planning
and Development
FW *lip
January 14, 1997
Reviewed by,
f�
W.H. Stockwell,
Chief Administrative
Officer
Attachment No. 1 - Summary Table Comparing the Key Elements between the
Old and New Act
M
. .....__._..
KEY DIFFERENCES BETWEEN
THE 1989 AND THE 1996 DEVELOPMENT CHARGES ACT
ISSUES
OLD ACT
NEW ACT
COMMENTS
Eligible
•
hard and soft services
•
exclude soft services such as city
•
of all exclusion, parkland acquisition are
Services
halls, museum, hospital, theatres,
chargeable by Clarington
tourism facilities and parkland
acquisition, and other services to
•
animal control and borrowing interest may not be
be prescribed in regulations
chargeable
•
not allowed to charge for parkland acquisition
could be significant
Municipal
•
not specific
•
10% for water, sewer, roads,
•
cannot determine which "other services" are
Contribution
transit, hydro, fire and police
considered ineligible until detailed regulation is
•
existing by -law generally
made available
allows for 10% municipal
•
30% for other eligible services
contribution for hard services
Including library and recreational
•
30% municipal contribution is a major concern
and 5% for soft services
facilities
Calculating
•
level of service can be based
•
average level for past 10 years
•
have used the average approach in our last
the Cost of
on the highest standard
Development Charge Study
New Services
within last ten years
•
no specific provided for
•
must take into account of unused
•
research required to determine unused capacity,
unused capacity of facilities
capacity
could be a onerous exercise
and services
•
no specific regulation in
•
capital cost must be reduced by
•
represents substantial financial impact
determining capital cost
any capital grant/subsidies, and
municipal contributions
•
method of calculation will be
detailed in regulations
Background
•
no specific requirement
•
requires study to justify charges
•
will continue to prepare a study
Study
Required
•
requires study to examine
•
operational study is too onerous
operational impact
Exemption to
•
at Municipal discretion
•
can exempt from payment of
•
currently no charge applied for industrial or
industrial
charges
commercial development. This issue will be
development
reviewed.
•
can phase in or defer payment
•
require exemption of payment for
industrial expansion of 50% of
existing gross floor area
Transitional
Measures
a) Reserve
•
not applicable
•
certain rules are spelled out in
•
see report
Funds
terms of dealing with reserve
accounts, credits, existing debts
etc. (e.g. Reserve funds for
ineligible service will be rolled into
eligible service reserve funds if not
used in 5 years)
b) Debt
•
not specific
•
if municipality has incurred debt
•
see report
on an eligible service, the cost of
financing the debt is chargeable
but municipality must pay its share
of either 10 or 30%
Front -end
•
contains certain provisions
•
scope wider to allow accelerated
®
It's unclear if 10 and 30% municipal contribution is
Financing
development, risk to be taken on
applicable
by the front -end developer