March 12, 1998
TO:Strategic Policies and Priorities Committee
FROM:W. A. Liczyk
Chief Financial Officer & Treasurer
SUBJECT:Development Charges
Purpose:
To seek Council authorization to commence the requisite background studies and policy formulation
leading up to the introduction of a comprehensive development charges by-law for the City of Toronto.
Funding Sources, Financial Implications and Impact Statement:
Development charges are used as a mechanism to recover costs of infrastructure improvements necessary to accommodate
new development. The philosophy behind these charges is based on the concept that growth ought to pay for itself and that
development related costs should not fall on the tax base.
At present, development charges are not applied uniformly as a capital financing tool in the City of Toronto. The quantum
of the charges, the policies governing exemptions, credits and timing of collection and the alternative methods of exacting
development related contributions vary substantially across the new City. As a result, two identical development proposals
in different areas of the city are likely to be faced with vastly differing municipal financial requirements.
The provincial government has introduced a new Development Charges Act, which comes into force on March 1, 1998.
The enactment of this new legislation is timely in that it provides us the opportunity to comprehensively review the capital
needs of the new City of Toronto with a view to both fully utilizing this source of financing and standardizing the myriad of
rates and practices across the City.
The amount of work leading up to the implementation of a new development charges by-law is substantial. The process is
lengthy, requiring a multitude of background studies, justification of the levies, formulation of policy and consultation with
stakeholders. By-laws are subject to appeal to the Ontario Municipal Board.
It is proposed that the requisite background studies be funded from an existing development charge reserve fund
specifically established for this purpose. No other funding is required and there are no immediate financial implications on
the operating or capital budgets.
Recommendations:
It is recommended that:
- The Chief Financial Officer be authorized to utilize appropriate staff resources and funds of up to $300,000 from the
North York Development Charges Reserve Fund - Capital Growth Studies to undertake the requisite background studies
pursuant to the Development Charges Act, 1997
- The Chief Financial Officer be authorized to hire, where necessary, the appropriate consultants to assist with these
studies
- The Chief Financial Officer proceed as per the attached Schedule A, with a view to ensuring the appropriate by-laws are
in place within the 18 months window provided by the legislation.
Council Reference / Background / History:
N/A
Comments and / or Discussion and / or Justification:
What are A development charges@?
Municipalities have traditionally required that developers either build, or pay for infrastructure services that may be
required as a result of new development and re-development. In the past, there has been wide disparity among
municipalities in the methodology and practices of recovering capital costs from development. These practices have ranged
from the use of lot levies, sewage impost charges, S.37 of the Planning Act (bonus zoning) agreements, secondary plan
policies and conditions of zoning or site plan approval.
ADevelopment charges@ has a very specific meaning as per the legislation, and in this report is used within that context.
Development charges are charges imposed against the development or redevelopment of land to pay for growth-related
infrastructure. The Development Charges Act specifies the types of costs that may be included in a charge, and the
requirements which must be satisfied for a municipality to be able to levy these charges. Development charges pay for
Ahard services@ such as roads, sewers & watercourses and Asoft services@ such as recreation facilities, parks
development, library services, fire protection and other such services. The charges are intended to recover only capital
costs, while it is presumed that the new taxes generated by growth will pay for the operating/on-going maintenance costs
related to these services.
Development Charges are levies against new development that are collected under provincial legislation (the Development
Charges Act), and appropriate municipal by-laws. New development (in the context of the legislation) means development
of vacant lands and/or re-development of previously developed lands. In order to collect development charges, a
municipality is required to pass by-laws for the imposition of these charges in accordance with the requirements of the
Development Charges Act.
Development Charge Legislation
The first Development charges Act became law in November of 1989. The intent of the Act was to rationalize these
charges and clearly identify what was and was not collectible in the form of development levies. Most municipalities
brought forward appropriate by-laws, and have subsequently updated those by-laws as required by the legislation.
In November of 1996, the Provincial government introduced draft development charge legislation that was significantly
different from the previous Act. Following many months of consultation and intense debate, the legislation was
significantly amended, and eventually received royal assent on December 8, 1997. The regulations to the Act were released
on February 18, 1998 and the Lieutenant Governor issued a proclamation naming March 1, 1998, as the day the Act comes
into force.
The new legislation is different from the old in the following ways:
Ineligible services (Section 2): The new legislation specifically identifies services for which a municipality may not levy a
development charge. These services include cultural or entertainment facilities, tourism facilities, parkland acquisition,
hospitals, administrative buildings, waste management services and other services as prescribed in the regulations.
Exemption for industrial development (Section 4): Enlargement of the gross floor area of an existing industrial up to 50%
will not incur a development charge. Under the old legislation this specific provision did not exist.
Methodology for determining development charges (Section 5): The new legislation is more specific about the
methodology for developing standards and calculating the actual charges.
10% reduction in capital costs (Section 5): Capital costs for growth related infrastructure should be reduced by 10% before
the charges are determined. The following services are exempt from this sub-section; water supply services, including
distribution and treatment services; waste water services, including sewers and treatment services; storm water drainage
and control services; services related to a highway as defined in subsection 1 (1) of the Municipal Act; electrical power
services; police services; fire protection services; and other services as prescribed.
Other differences include longer appeal periods, a revised section on Front Ending Agreements, and extensive transition
provisions.
Current Status of Development Charges Within the New City
Three of the former municipalities in Toronto have development charge by-laws in place under development charge
legislation passed in November 1989 - North York, Etobicoke and Scarborough. These by-laws levy different rates, for
different types of development. In some cases, local Councils have adopted partial or full exemption of these charges to
different classes of development.
In 1997, North York, Scarborough and Etobicoke collectively raised approximately $15 million in development charge
revenue. This revenue is restricted in use by legislation and can only be spent on specific services and in the former
municipalities in which the charges were imposed. Existing development charge reserve funds currently total in excess of
$42 million.
Metropolitan Toronto Council in October, 1997 approved a by-law to levy area specific charges to finance the
growth-related cost attributed to the Sheppard subway. This by-law was developed for implementation under the new
development charge legislation. Schedule B provides a summary of existing charges and practices.
Effective January 1, 1998, Bill 103, The City of Toronto Act, 1997 extended these different development charge by-laws
to the new City of Toronto. As a result, different development charges are currently collected within different areas in the
new City of Toronto. The new Development Charges Act enables current Development Charges by-laws to continue into
force until the end of an eighteen (18) months transition period, that is until September 1, 1999. Staff must undertake
substantial work and appropriate background studies in order to develop and justify any recommended development
charges.
Under normal circumstances 18 months would be sufficient time to meet the requirements of the new draft legislation. In
the new City of Toronto, key decisions will be required fairly early in 1998 for the process to be completed within the
time-frame provided by the new legislation. To that end, a work plan and timetable for implementation has been prepared
and is attached as Schedule AA@.
Why Are Development Charges so Important?
Development charges can play an important role in alleviating some of the financial pressures we are experiencing in the
new City of Toronto. The Capital Budget in particular will require serious consideration of alternative funding sources for
infrastructure. Development charges are one such source that should be explored within the context of a comprehensive
development/re-development plan for the new City of Toronto. A simulation model developed by staff provides a broad
order of magnitude estimate of the potential development charge revenues that can be generated in the new City of Toronto.
The model estimates potential development charge revenues of $45-$55 million per year.
The preliminary estimates serve only to provide a general measure of the level of revenues that can be raised from this
financing source. Revenue estimates will be impacted by a number of policy decisions that Council will have to consider.
These include whether or not to provide full or partial exemptions to various classes of property, the degree of
competitiveness of the charges relative to other GTA municipalities and the extent to which development charges should be
set to recover all eligible growth related costs (ie. the recovery rate).
Conclusions:
This report begins the lengthy process of reviewing future development potential, developing a long-term capital program,
gathering data related to service levels, costs and standards and establishing the criteria and principles on which a
development charges by-law (or by-laws) should be based. The process requires that staff work in consultation with the
development industry and other stakeholders so as to recommend charges that are reasonable, but reflective of the impact of
new development/re-development on the city=s capital infrastructure.
Contact Name and Telephone Number:
Val Sequeira
Metro Hall397-4225
Scarborough 396-4271
Rob Hatton
Metro Hall 392-9149
Joe Farag
North York 395-6706
Metro Hall 397-4208
jfarag@city.north-york.on.ca
W. A. Liczyk
Chief Financial Officer & Treasurer
SCHEDULE AA@
WORK PROGRAM
FOR ADOPTION OF A NEW DEVELOPMENT CHARGE BYLAW
AND RELATED POLICIES
|
Phases |
Key Elements |
Time Frame |
1. Approval to Commence |
Council
|
Mar/98 - Apr/98 |
2.Start up |
- Establish interdepartment D.C. working group (Finance, Planning,
Legal, Works, Transportation, etc)
Retain consultant(s)
Initial consultation with development/homebuilders industry
|
Apr/98 - May/98 |
- Data Collection
|
- Review existing and uncommitted reserve fund balances
- Growth forecast (res., com., ind., inst.) for 10 yr, 20 yr
or OP build-out
- Determination of which services/servicing situations are
to be covered under subdivision/consent agreements
(outside DCA)
- Average 10 yr service standard determination
- Identification and cost of potential works related to
growth
- Review of long term debt and identification of existing
facility oversizing
|
Jun/98 - Sept/98 |
- Policy Development
|
- Assessment of Municipal-wide vs area specific D.C.=s
- Analysis of transitional issues related to existing
municipal benefits, ineligible municipal services and
outstanding debt
- Formulation of DC credit policy and any other relevant
agreements or credit provisions including former City
by-laws
|
Aug/98 - Oct/98 |
- Development Charges
Calculations and Rules
|
- Estimation of costs to meet increases in need for
services attributable to development; the required
works; existing facility oversizing consistent with
services standards
- Calculation of D.C. rates reduced by:
- existing capacity created
- benefit derived by existing development from the
increase in service
- anticipated capital grants, subsidies or other
contributions
- percentages and capital costs exclusion
designated by Act
- formulation of rules for exemptions, phase-in, indexing,
charges for re-development, etc.
- Preparation of D.C. background study
|
Oct/98 - Dec/98 |
- Examination of Long
Term Capital &
Operating Costs
|
- Examine the long term capital and operating costs for
capital infrastructure required to service new
development.
|
Nov/98 - Jan/99 |
- Draft D.C. Background
Study
|
- Finalization of draft D.C. background study for review
with D.C. Steering Committee/SP&P/Council
- Formulation of preliminary policies re: credits,
commencement date, collection timing, etc.
|
Jan/99 - Feb/99 |
8.Public Process |
- Pre-meeting consultations
- Advertisement and holding of Public meetings
- Receipt and consideration of submissions
|
Mar/99 - May/99 |
9.Adoption Process |
- Preparation of public consultation report, including
review of options and assessment of impacts
|
Jun/99 - Jul/99 |
10.Implementation
Process |
- Collections/administration process
- By-law indexation
- Reserve fund reporting requirements
- Notice for former section 13 credits
- Former section 14 credits
|
Jul/99 - Aug/99 |
SCHEDULE AB@
SCHEDULE OF DEVELOPMENT CHARGES
IN THE NEW CITY OF TORONTO
AS OF FEBRUARY 1, 1998
RESIDENTIAL ($ per unit)
|
Metro |
East
York |
Etobicoke |
North York |
Scarborough |
Toronto |
York |
By-law
141-97 |
By-law 1995-164 |
By-law
1995-165 |
By-law 31597
as amended |
By-law
31598
as
amended |
By-law
24630 |
By-law
24646 |
By-law
632-91 |
By-law
2334-91 |
Sheppard
Subway |
City-Wide |
Motel
Strip |
Hydro |
City-Wide |
Yonge
Centre |
Hydro |
City |
PUC |
as
amended
Repealed |
as
amended |
Single |
2,713 |
n/c |
2,383 |
3,003 |
346 |
3,931 |
3,353 |
148 |
3,806 |
505 |
n/c |
n/c |
Multiple |
2,325 |
n/c |
|
|
|
3,369 |
2,874 |
128 |
3,729 |
344 |
n/c |
n/c |
Apartment |
|
|
|
|
|
|
|
|
|
|
|
|
2 bdrm &
larger |
1,628 |
n/c |
1,723 |
2,166 |
248 |
2,359 |
2,011 |
84 |
2,412 |
309 |
n/c |
n/c |
1 bdrm &
bachelor |
1,163 |
n/c |
1,304 |
1,625 |
189 |
1,682 |
1,437 |
84 |
2,412 |
309 |
n/c |
n/c |
All Other |
|
n/c |
2,085 |
2,617 |
302 |
|
|
|
|
|
n/c |
n/c |
NON-RESIDENTIAL ($ per square foot of gross floor area)
|
Metro |
East
York |
Etobicoke |
North York |
Scarborough |
Toronto |
York |
By-law
141-97 |
By-law 1995-164 |
By-law
1995-165 |
By-law 31597
as amended |
By-law
31598
as
amended |
By-law
24630 |
By-law
24646 |
By-law
632-91 |
By-law
2334-91 |
Sheppard
Subway |
City-Wide |
Motel
Strip |
Hydro |
City-Wide |
Yonge
Centre |
Hydro |
City |
PUC |
as
amended
Repealed |
as
amended |
Office |
2.58 |
n/c |
n/c |
n/c |
n/c |
1.37 |
2.02 |
0.45 |
0.00 |
0.00 |
n/c |
n/c |
Commercial |
2.58 |
n/c |
n/c |
n/c |
n/c |
1.37 |
2.02 |
0.45 |
0.68 |
0.67 |
n/c |
n/c |
Industrial |
1.36 |
n/c |
n/c |
n/c |
n/c |
1.37 |
2.02 |
0.45 |
0.00 |
0.00 |
n/c |
n/c |
Other
Non-Residential |
1.36 |
n/c |
n/c |
n/c |
n/c |
1.37 |
2.02 |
0.45 |
0.68 |
0.31 |
n/c |
n/c |
Notes:
Etobicoke - Additional charge for storm water quality which is calculated using a formula
Scarborough - City Council passed a resolution in June 1997 to waive development charges on industrial and office
development in an effort to stimulate non-residential development. Scarborough PUC is considering a proposal to waive
their development charge (includes electrical and water ) for industrial and office development, as well.
Toronto - Original by-law passed October, 1991. Amendment to the by-law passed in April 1992 which placed a
moratorium on the collection of development charges until January 1, 1995. Council deferred their decision to March 21,
1995. At that time the by-law was repealed. The City charges commercial, industrial and high density residential
development a sewage impost fee of $0.70/s.f.
York - Original by-law passed in October, 1991. OMB disposed of two outstanding appeals on August 31, 1992 and
ordered a reduction in the non-residential charge by 50% until October 10, 1993. Council subsequently amended the by-law
in October, 1992 to reduce the non-residential charge until October 10, 1993. June 25, 1997, Council passed by-law
3500-97 suspending the requirement to pay development charges.
North York - By-law 32818 was passed on July 10, 1996. This by-law amends the City and Hydro development charge
by-laws to exempt industrial uses on industrially zoned lands from payment of development charges.
Metro Toronto - By-law 141-97 was passed by Metro Council on October 9, 1997. The charges apply only to the Sheppard
East Corridor and the Yonge Centre.
|