The city is set to lose more than $12 million in development charge revenue over the next five years following the sweeping changes rolled out through Bill 23.
At Monday’s council meeting, Hemson Consulting presented a background study outlining the city’s financial horizon with regard to development charges (DC), as the city’s current DC bylaw is set to expire in February. Development charges are levied to developers to help pay for infrastructure related to new growth.
Council voted to adopt the presented background study, and the new DC bylaw will be brought to the Feb. 13 meeting of council for approval.
Among the changes coming through Bill 23 are DC exemptions for a wide variety of developments, meaning the city will not be able to levy a fee on such work moving forward.
Some of these exemptions include the following:
- For existing rental buildings of four or more units, one additional unit, or up to 1 per cent of total units, may be added without incurring a DC;
- For residential intensification, where units–such as a basement suite or a “granny flat”–are added to existing homes;
- For non-profit housing; and
- For inclusionary zoning units
“The government is looking at ways of trying to create affordable housing and also the objective of creating 1.5 million new homes over the next 10 years,” Craig Binning, partner with Hemson Consulting, told city councillors Monday. “That's a significantly higher amount of housing supply than the province has achieved in any historically recent period of time.”
Binning said the exemptions for affordable housing are not yet in effect, however, as further clarification is required from the province.
“Affordable is defined under the legislation for rental properties as being 80 per cent of the average market rent … and 80 per cent of the average purchase price,” he said. “We have not been provided with the information yet on what those amounts are going to be.”
The province has yet to clarify what the 80 per cent rate for affordability will be measured against, he said.
“The province has indicated that they will make those (numbers) available, and we don't know what geographic basis they're going to use, and that … will form the basis of the implementation of this affordable exemption," Binning explained.
Additionally, there will be exemptions for “attainable housing,” Binning said, but the province has yet to provide a specific definition of attainable housing.
Beyond direct revenue loss from DC exemptions, more than $4 million of the estimated $12 million in losses will come through a mandatory five-year bylaw phase-in introduced through Bill 23.
“What this means is when you enact a new development charge bylaw, in the first four years of that period, there will be a discounting off of the total rate,” Binning explained.
“In the first year it's at 80 per cent of that maximum rate in the development charge bylaw … and it's not until the fifth year of the bylaw that you're (collecting) fully calculated rates," he explained. "This will have a significant revenue impact on the municipality and there will be revenue loss associated with that.”
On top of that, an additional discount will be given to rental housing construction, which is defined as a building with four or more units used exclusively for renting.
“If you're constructing a unit that has three bedrooms or more the development charge is discounted back 25 per cent,” Binning said. “If it's got two bedrooms, by 20 per cent, and if it's a one bedroom or a bachelor unit, by 15 per cent, and that's in addition to the phased-in or discounted rates.”
Coun. Ralph Cipolla asked whether this lost revenue might be secured elsewhere.
Binning said he’s awaiting news on the province about an “accelerator fund” from the province meant to help municipalities weather their DC losses, but said property taxes and utility rates may need to be used to offset losses.
“We're anxiously looking to see what the province is talking about in terms of this accelerator fund, and whether there's going to be monies made available through some program to offset those revenue losses,” he said.
“We're also exploring … if there's other mechanisms that we can use, outside of property taxes and utility rates to fund those," Binnins said. “Currently, I would say that those are likely going to be your prime means of funding those revenue losses.”
Coun. Tim Lauer asked how the $12 million impact would be split across water and wastewater rates and the tax levy.
“I realize the ratepayer and the taxpayer are the same people, but they certainly fall under different categories, so is that $12 million straight up tax levy, or is it a combination of both?” Lauer asked.
Binning responded it would likely be a 60-40 split across the tax levy and utility rates.
Coun. Janet-Lynne Durnford asked whether “accessory dwelling units, such as backyard tiny homes” would also be exempt under Bill 23.
“As long as (the) additional unit is on the same lot of land, and under one ownership, almost any built form of that secondary suite, whether it's within the primary unit, or above a garage, or even if you could have a laneway house … all of those types of build forms would be exempt from the development charge,” Binning said.
Beyond the five-year outlook, the city's capital program between 2022 and 2041 — including roads, sanitary sewage, waterworks and stormwater infrastructure — will cost the city $243 million, $60 million of which will be eligible for recovery through DCs.
Click here to read the 280-page background study and report that was discussed Monday.
