3. 2009 DEVELOPMENT CHARGES BY-LAW REVIEW: POLICY FRAMEWORK

EXAMEN DE 2009 DU RÈGLEMENT MUNICIPAL SUR LES REDEVANCES D'AMÉNAGEMENT : CADRE STRATÉGIQUE

Committee recommendations as amended

That Council approve the policy framework underlying the update of the Development Charges Background Study as detailed in this report.

1. That Development Charge By-law be used to recover the full costs of eligible infrastructure;

2. That the costs continue to be allocated on a city-wide and area specific basis per Document 1 of this report;

3. That the distribution of arterial and collector road servicing costs be allocated based on Vehicle Kilometres Travelled (VKT);

4. That the annual indexing of the various DC rates be adjusted to correspond to the date of the new Development Charge By-law adoption in 2009;

5. That the transition period for applying the new DC rates to building permits, that have been filed with the City prior to passage of the new by-law, be extended to December 31, 2009;

6. That going forward with the new Development Charges By-law, a cash-flow analysis be undertaken to determine the residential and non-residential charges;

7. That the repayment of front-ended projects be based on the schedule of timing identified in the cash-flow analysis;

8. That redevelopment credits expire five years after the issuance of a demolition permit.

RecommandationS modifiÉeS du Comité

Que le Conseil approuve le cadre stratégique sous-tendant la mise à jour de l’étude préliminaire sur les redevances d’aménagement, comme il est expliqué en détail dans le présent rapport :

1. que le Règlement municipal sur les redevances d'aménagement serve à recouvrer la totalité des coûts des aménagements admissibles;

2. que les coûts continuent d'être répartis en fonction de l'ensemble de la ville et des secteurs particuliers, conformément au document 1 du présent rapport;

3. que la répartition des coûts de soutien des artères et des routes collectrices principales soit basée sur le nombre de véhicules-kilomètres;

4. que l'indexation annuelle des divers tarifs de redevances d'aménagement soit ajustée de manière à concorder avec la date d'adoption du nouveau Règlement municipal sur les redevances d'aménagement en 2009;

5. que la période de transition pour l'application des nouveaux tarifs de redevances d'aménagement aux permis de construire demandés à la Ville avant l'adoption du nouveau règlement municipal soit prolongée jusqu'au 31 décembre 2009;

6. que dorénavant, le Règlement sur les redevances d'aménagement exige qu'une analyse des flux d'encaisse soit effectuée afin de déterminer les redevances d'aménagement résidentiel et non résidentiel;

7. que le remboursement des projets financés par anticipation soit basé sur le calendrier établi dans l'analyse des flux d'encaisse;

8. que les crédits au réaménagement expirent cinq ans après la délivrance du permis de démolir.

Documentation

1. Deputy City Manager's report, Infrastructure Services and Community Sustainability, dated 17 February 2009 (ACS2009-ICS-CCS-0002).

2. Extract of Draft Minutes, 24 February 2009.

Report to/Rapport au :

Planning and Environment Committee

Comité de l’urbanisme et de l’environnement

and Council / et au Conseil

17 February 2009 / le 17 février 2009

Submitted by/Soumis par : Nancy Schepers, Deputy City Manager

Directrice municipale adjointe

Infrastructure Services and Community Sustainability

Services d’infrastructure et Viabilité des collectivités

Contact Person/Personne-ressource : Rob Mackay, Acting Director/Directeur intérimaire, Community Sustainability Services/Services de viabilité des collectivités

(613) 580-2424 x22632, Rob.Mackay@ottawa.ca

City Wide/à l'échelle de la Ville

Ref N°: ACS2009-ICS-CSS-0002

SUBJECT:	2009 DEVELOPMENT CHARGES BY-LAW REVIEW: POLICY FRAMEWORK

OBJET :	EXAMEN DE 2009 DU RÈGLEMENT MUNICIPAL SUR LES REDEVANCES D'AMÉNAGEMENT : CADRE STRATÉGIQUE

REPORT RECOMMENDATIONS

That the Planning and Environment Committee recommend Council approve the policy framework underlying the update of the Development Charges Background Study as detailed in this report.

1. That Development Charge By-law be used to recover the full costs of eligible infrastructure;

2. That the costs continue to be allocated on a city-wide and area specific basis per Document 1 of this report;

3. That the distribution of arterial and collector road servicing costs be allocated based on Vehicle Kilometres Travelled (VKT);

4. That non-statutory exemptions, unless they promote smart growth or affordable housing, be discontinued two-years after the passage of the by-law;

5. That the annual indexing of the various dc rates be adjusted to correspond to the date of the new Development Charge By-law adoption in 2009;

6. That the transition period for applying the new DC rates to building permits, that have been filed with the City prior to passage of the new by-law, be extended to December 31, 2009;

7. That going forward with the new Development Charges By-law, a cash-flow analysis be undertaken to determine the residential and non-residential charges;

8. That the repayment of front-ended projects be based on the schedule of timing identified in the cash-flow analysis;

9. That redevelopment credits expire five years after the issuance of a demolition permit.

RECOMMANDATIONS DU RAPPORT

Que le Comité de l’urbanisme et de l’environnement recommande au Conseil d’approuver le cadre stratégique sous-tendant la mise à jour de l’étude préliminaire sur les redevances d’aménagement, comme il est expliqué en détail dans le présent rapport :

1. que le Règlement municipal sur les redevances d'aménagement serve à recouvrer la totalité des coûts des aménagements admissibles;

2. que les coûts continuent d'être répartis en fonction de l'ensemble de la ville et des secteurs particuliers, conformément au document 1 du présent rapport;

3. que la répartition des coûts de soutien des artères et des routes collectrices principales soit basée sur le nombre de véhicules-kilomètres;

4. que les exemptions non législatives, sauf celles qui favorisent la croissance intelligente ou le logement abordable, soient supprimées deux ans après l'adoption du règlement municipal;

5. que l'indexation annuelle des divers tarifs de redevances d'aménagement soit ajustée de manière à concorder avec la date d'adoption du nouveau Règlement municipal sur les redevances d'aménagement en 2009;

6. que la période de transition pour l'application des nouveaux tarifs de redevances d'aménagement aux permis de construire demandés à la Ville avant l'adoption du nouveau règlement municipal soit prolongée jusqu'au 31 décembre 2009;

7. que dorénavant, le Règlement sur les redevances d'aménagement exige qu'une analyse des flux d'encaisse soit effectuée afin de déterminer les redevances d'aménagement résidentiel et non résidentiel;

8. que le remboursement des projets financés par anticipation soit basé sur le calendrier établi dans l'analyse des flux d'encaisse;

9. que les crédits au réaménagement expirent cinq ans après la délivrance du permis de démolir.

BACKGROUND

The Development Charges Act, 1997 (DCA) received Royal Assent December 8, 1997. According to the Act, when municipalities adopt a development charge by-law, it must be supported by a background study that estimates the amount, type and location of development; includes a calculation for each municipal service included in the development charge (e.g. growth/non-growth split, residential/non-residential split, capacity in existing systems), and an examination, for each service, of the long-term capital and operating costs for the capital infrastructure required and other information that is deemed relevant. The DCA also states that municipalities, wanting to impose development charges, must update and complete a new background study to determine development charges within a five-year period of the existing by law in-force date. Therefore, the City of Ottawa must pass new development charge by-laws by July 2009 when its various by-laws expire. The upcoming adoption of the City’s revised Official Plan and related Transportation and Infrastructure Master Plans will establish a new vision for determining capital priorities based on current growth projections.

DISCUSSION

This report is designed to initiate the policy discussion required in producing a revised development charges background study and by-law. Staff and the consultant have established various components of the policy framework and calculation methodology proposed to be incorporated into the revised study. The following outlines several of the key principles and approaches required in calculating the new set of charges that are tailored to the City’s specific requirements.

Calculation Framework

a) The Development Charge (DC) By-law will be used to recover the full costs of anticipated development.

One of the Guiding Principles passed as part of the Fiscal Framework-2007 is that growth should pay for itself to the full extent allowed by legislation and not be subsidized by property taxes and utility rates. Staff, as part of the completion of the DC background study, will undertake a review of the quantum of both the residential and non-residential development charge rates based on the Council approved growth forecast (population/employment projections). The overall goal will be to collect development charges to fund the forecasted total growth-related capital program for the provision of eligible services. The City's list of categories of services includes: Roads, Sanitary Sewers, Water, Stormwater, Fire, Police, Public Transit, Parks, Recreation, Libraries, Child Care, Paramedic Services, Public Works, and Studies. In addition, a new service category has been included for the provision of Social Housing. Municipal services which continue to be ineligible for DC funding include cultural facilities e.g. museums, theatres and art galleries; tourism facilities e.g. convention centres; parkland acquisition, including woodlots and environmentally sensitive areas; hospitals; waste management services; and general administrative headquarters.

In 2006, the Province of Ontario amended the DCA to allow the Region of York and City of Toronto to increase the DC funding available to offset the costs of Toronto/York Subway Extension. The two innovative financing strategies granted by the Province were: basing the planned level of service on future requirements rather than on the average level of service in the ten years prior to the study and exempting the Toronto/York Subway Extension from the requirement for a 10 per cent mandatory municipal contribution. In the fall of 2008, the Province of Ontario decided not to amend the DCA to also allow other municipalities the ability to use these financial strategies to increase the amount of DC funding associated with implementing similar transit service expansions.

b) The study will incorporate objectives contained in the Official Plan update, Transportation, and Infrastructure Master Plan reviews to be completed in early 2009.

The structure of the development charge by-law(s) will continue to be used to contribute to the implementation of policies such as the encouragement of compact development, use of existing infrastructure, encouragement of mixed-use development, and concentration of rural growth in villages. The master plans will also contain updated estimates of project timing and detailed construction costs. Although in the recently completed analysis by Hemson Consulting it suggests there is a municipal deficit in servicing village development, staff believe this represents good land use planning that prevents ribbon development, etc.

c) The calculation methodology will continue to align the servicing characteristic and geography of Ottawa (Document 1), which are as follows:

i. Implement city-wide cost allocation for those service areas that are appropriately funded by all new development.

Some growth-related services provide benefit throughout the Ottawa service area. These often provide benefit to the entire Ottawa area from a single location (sewage treatment) or the growth-related benefit is diffuse and cannot be assigned to a specific geographic location. Other examples are: water purification, major road network, and child care. The growth component of these facilities should be cost-shared at a uniform rate in one part of the city as another.

ii. Implement specific "large area rates" for services that can be assigned to general geographic distribution areas.

Wherever possible and reasonable, charges should be amalgamated to a higher geographic area to spread the cost over the area of development being served; to reduce administrative error and cost; to increase stakeholder community understanding; to avoid penalizing development unnecessarily for particular geographic features; and to maintain some consistency between charges for growth-related municipal services, property taxation and user fee practices.

With fewer area-specific charges, the City is better able to determine its servicing priorities; to use funding more flexibly within service accounts; to better respond to factors impacting municipal decisions; and to be more strategic in its service provision. Monies collected for services in relation to development charges cannot be used for another purpose. Therefore care must be taken in the definition of areas. If areas are defined too finely, it may remove users of the service from the requirement to pay (those locating outside of the defined area). For example, with a recreation facility, if the area of users were too narrowly defined, future users from other growth areas would not be required to pay, even though they are users of the facility. Narrowly defined areas can lead to a reduction in flexibility for the municipality as monies collected can only be spent for the specific services in the specific area. In addition, it would reduce the City's ability to determine its servicing priorities. In effect, individual developers would determine the priority of the infrastructure that gets built. With the definition of specific areas at an appropriately high level, these concerns can be greatly mitigated.

Therefore, to implement the general direction of the revised Official Plan and to reflect principles of equity, most services would be assessed with a large area approach: Inside the Greenbelt, Outside the Greenbelt, and Rural. For example, staff are proposing that the arterials and collectors within the Roads service category be allocated based on the additional Vehicle Kilometres Travelled (VKT) generated from each area. This distribution takes into account the increase in trip internalization from the three large geographic areas. This results in the following allocation of future Road costs: eight per cent to Inside the Greenbelt, 65 per cent to Outside the Greenbelt, and 27 per cent to the Rural Area.

The current Official Plan and existing by-laws provide that particular portions of the city are not within the service area for some municipal services. As a result, residents outside of the defined boundary have not shared in the cost of providing sanitary, water and transit services. This practice will be reviewed as part of the by-law update.

iii. Implement specific area rates for services that clearly benefit only a definable client group.

Some growth-related servicing projects are required solely for the benefit of a localized and definable service area, for example, the construction of a storm water management infrastructure that provides a service to specific lands not previously serviced. Such costs can be segregated and allocated to specific benefiting areas. This practice would be continued where a clear case can be made that it is the most equitable practice. It also encourages landowners to address servicing and infrastructure requirements by entering into front-ending agreements with the City.

d) Undertake a review of the current list of discretionary or non-statutory exemptions.

Development charges are based upon the estimated capital needs attributable to growth-related municipal services. Where charges for categories of uses are exempted or reduced, some other means of funding or offsetting the capital costs must be found. Exemptions are most effective when they represent the difference between a project proceeding and not proceeding by funding the gap to make the project financially feasible. Therefore, certain non-statutory exemptions (Document 2) are proposed to be discontinued unless they promote transit use, smart growth and environmental stewardship such as the use of existing infrastructure (redevelopment of brownfield areas) and are considered sufficiently desirable (non-profit housing) to warrant a tax-based subsidy. There will be a two-year phase-out period, starting on date of the passage of the by-law, in which organizations will be able to continue to apply for an exemption under the current by-law provisions. After the two-year grace period, all of the exemptions listed in Document #2 to be discontinued, are proposed to be eliminated.

e) Continue to use the Infrastructure Construction Price Index.

In March 2003, Council adopted a Statistics Canada Infrastructure Development Charges Price Index to replace the use of the Statistics Canada Construction Price Index that is prescribed by the Development Charges Act, 1997. The new inflation factor was considered by the City and industry to better reflect the localized benchmark costs for Ottawa. The new index has increased 17 per cent (2002-2006) versus 24 per cent to 25 per cent for the prescribed (Toronto) DC Index over the same timeframe. Currently, indexing takes place annually on April 1 but will be adjusted to correspond to the date of by-law adoption. The development industry has requested this change to better reflect their construction cycle.

f) Provide for post-adoption implementation requirements to allow landowners with in-stream planning applications to receive the benefit of the existing lower development charges (if applicable).

During the last by-law review several landowners challenged the City on the lack of transition provisions as grounds for appealing the by-law. There is no legislative requirement for such provisions; however, many municipalities currently provide a transition program. In the last by-law the transition time frame was extended to December 1. Staff are recommending an extension to the end of the year. The cost of phasing in the charges under the current by-law was approximately $8 million.

g) Review existing by-law definitions.

The proposed definition changes to the by-law will help provide greater clarity regarding the application and implementation of various provisions and rates, therefore, assisting staff in the day-to-day administration of the documents.

h) Undertake a cash-flow analysis to determine the quantum of the residential and non-residential charges.

The final step in determining the new rates will be an annualized cash-flow analysis of the growth-related net capital program for each service category. This methodology will take into account the forecasted timing of projects, receipt of payments, interest earnings, reserve fund balances (for both hard and possibly soft services) and carrying costs. In many instances, expenditures are required for roads, water, and sewer projects well in advance of the collection of fees. The City will, therefore, experience financial challenges because cash flows may not be at optimal levels. This will require the assistance of the development community to help facilitate the construction of certain projects. Staff will work with developers to establish a viable financing plan that will provide the necessary funding to undertake infrastructure works in a timely sequence. Such funding arrangements could include the prepayment of development charges, front-ending agreements, and credits (services-in-lieu) for all or a portion of fees payable given in exchange for performing the work. It is anticipated that there will be minor timing changes made to the capital forecast as part of the City’s annual capital budget process. Repayment of front-ended projects will be based on the schedule of timing identified in the background study.

i) Update redevelopment credits (demolition credits).

Redevelopment credits are provided in recognition that a pre-existing residential and non-residential building or structure, that has been demolished, had an existing demand on services allocated to the property. Staff are recommending the imposition of a five-year time limit, which is common municipal practice, between the issuance of a demolition permit and the granting of a building permit for preserving the credit. Any demolitions that take place after the passage of the new by-law will be subject to the five-year redevelopment credit expiry period. Demolition allowances would continue to be based on the rate in effect in the active by-law with the overall development charge reduction not exceeding the amount otherwise payable. A credit would not apply, after a two-year transition period, if a building type were exempt under the by-law i.e. former school sites. Finally, credits would remain with the property and would not be transferable to another parcel of land.

j) Timetable for the Development Charges Study.

The development of a new background study will be lead by Community Sustainability Services Branch with input and assistance from the various City departments. Consulting services have been retained for specific areas of work. An Advisory Committee has been established for the study, consisting of managers and directors from many areas of the corporation. This committee is intended to ensure that there is corporate-wide understanding and concurrence with the development charges review process. A Stakeholders' Group has been formed to provide input into the process and feedback at key stages of the review. A timetable for the development charges review is provided for information in Document 3.

The critical points in the review include: the timing of the adoption of the new by-law, the formal public consultation process that will take place in the spring of 2009 and the preparation of the information for the public consultation process.

CONSULTATION

Before passing a development charge by-law, Council is required to hold at least one public meeting to review the Development Charges Background Report, Council report and proposed Development Charges By-law. The timelines of the Development Charges Review Study work plan foresees this meeting to be held at the Corporate Services and Economic Development Committee at the end of May 2009. A minimum of 20 days notice of the meeting(s) is required and the proposed by-law and background study are to be made available to the public at least two weeks prior to the meeting. Public notice may be given by publication in a newspaper with sufficiently general circulation.

Any person who attends a meeting may make representations relating to the proposed by-law. If a proposed by-law is changed following a meeting, Council shall determine whether a further meeting is necessary. Such a determination is final and not subject to review by a court or the Ontario Municipal Board.

Prior to the formal public consultation, a Development Charges Stakeholders’ Group has been established. The Stakeholders’ Group is comprised of interested representatives of the residential and non-residential development community, GOHBA and BOMA, and citizen groups. The Stakeholders’ Group is intended to provide an informal forum for input, liaison and feedback at key stages of the preparation of the development charges by-law.

LEGAL/RISK MANAGEMENT IMPLICATIONS

The Development Charges Act provides for a five-year time period for the duration of development charges by-laws. The current by-laws were enacted on 14 July 2004; therefore the next by-laws must be enacted no later than 13 July 2009.

To the extent that persons are of the view that the City does not follow the process set forth in the act and regulation with respect to the content of the background study and the by-law, they are able to appeal the by-law to the Ontario Municipal Board. The Board does not have the power to increase a development charge but may only provide for a decrease. Where the Board does so, affected persons are entitled to a refund with interest.

FINANCIAL IMPLICATIONS

The fiscal framework is the City’s high-level “roadmap” to sustainable finances. It is a Council-endorsed “financial constitution”, which will guide all financial decisions and will be the primary instrument to measure the City’s financial condition. One of the ten key financial elements listed under Growth is that the DC by-law will be used to recover the costs of growth to the full extent permitted by legislation (thereby minimizing the financial burden of the costs of growth on existing residents).

SUPPORTING DOCUMENTATION

Document 1 - Summary of Proposed Geographic Recovery Areas

Document 2 - List of Discretionary Exemptions

Document 3 - Development Charges Update - Timetable

Document 4 - Development Charge Issue Paper

DISPOSITION

City staff to carry out the direction of Council with regards to the preparation of the Development Charges Study.

Service	DC Recovery Area
Arterial roads		√
Collector roads		√
Water purification	√
Water distribution		√
Sanitary sewer treatment	√
Sanitary sewer collection		√
Storm drainage general	√
Storm drainage ponds			√
Police stations		√
Police vehicles	√
Fire stations and vehicles		√
Transit corridors and vehicles	√
Neighbourhood and community parks		√
Recreation centres	√
Other recreation facilities		√
Library branches		√
Library materials	√
Child care facilities	√
EMS posts and vehicles	√
Vehicles and works yards	√
Social housing	√
Corporate studies	√

2009 DEVELOPMENT CHARGES BY-LAW REVIEW: POLICY FRAMEWORK

EXAMEN DE 2009 DU RÈGLEMENT MUNICIPAL SUR LES REDEVANCES D'AMÉNAGEMENT : CADRE STRATÉGIQUE

ACS2009-ICS-CSS-0002 CITY WIDE/À L'ÉCHELLE DE LA VILLE

Rob Mackay, Acting Director of Community Sustainability Services, provided a PowerPoint presentation, which is held on file with the City Clerk. He was accompanied by Gary Baker, Program Manager of Development Charges and Ian Cross, Manager of Economic Development.

Chair Hume noted that a development charge exemption might not be the best way to achieve a public policy goal, noting that it is probably the only tool the City has been using.

Nancy Schepers, Deputy City Manager, Infrastructure Services & Community Sustainability responded that staff would provide additional analysis on available tools to assist with key public policy decisions. With respect to the downtown exemption, Chair Hume thought there might be other tools that would better achieve public policy goals and infrastructure needs in the central area.

In response to questions from councillors, staff provided the following clarifications:

· Cam Watson is only one of two consultants working in Ontario on development charges studies.

· Recommendation 4 is included to ensure staff have clear direction moving forward in the preparation of the background study. During the last review, exemptions were added at the Council adoption stage.

· Non-statutory exemptions over the last five years have resulted in approximately $21 million in deferred growth related infrastructure. There is road and sewer infrastructure in various wards that have not been able to proceed partly because of this exemption list. Over the last five years, the exemptions for places of worship have resulted in a loss of $1.6 million. Staff agreed to provide the list of exemptions and the breakdown of the $21 million and how it relates to the overall collected development charges.

· Brownfields are included as an exemption, as this type of development promotes intensification by turning these sites around and causing taxes to be paid. At least two brownfield projects have been approved and two are currently under review. Site size is not a factor under the current program.

· The matrix of cost will return to committee. If a change is required to the exemptions or to the phase out period, adjustments can be made, as the modeling will be in place.

· Estimate the capital cost to provide the service level and reduce the cost by the capital grant subsidies that are in hand and available, but the amount is reduced.

· A list of members of the Stakeholders Group will be made available by staff.

· The consultant carefully looks at the projects to assign growth and Benefit to Existing (BTE). The project list will be released, outlining the BTE component, which can be challenged.

· With respect to recommendation 3 and Vehicle Kilometers Traveled (VKT), it is unclear if the calculation includes transit but it is assumed it involves vehicle trips. Staff will report back on how the Greenbelt is factored in and charged. It is anticipated that the rate will be lower inside the Greenbelt; however it is too early to provide an indication of what the rates might look like.

· Staff are proposing that if a project is to be advanced through a front ending agreement, repayment will occur in the year initially forecasted for the work to occur. The wording of the agreements will be changed accordingly. Staff will provide additional information with respect to how front-ending agreements work and are funded.

· In regard to the transition provision, staff wanted to provide at least six months to allow for the dealing of complex sites. If a permit is within the system before the adoption of the by-law, a permit must be released before the end of 2009 and the fees must be paid. Developers have expressed concern with the lack of transition policies under the current by-law.

· A two-transition period is also provided for non-statutory exemptions being removed from the by-law, including the downtown exemption. The new Official Plan proposes intensification for this and other areas. Much development and intensification has occurred in Westboro and the By Ward Market, two areas that were not exempted from development charges. Staff will provide information on the exemption area as part of the direction on possible tools to achieve policy goals.

· The proposed approach will provide a cash flow basis for sufficient investment in growth related projects each year. A 2006 policy required that all the funds must be received in order to proceed with a park. Certain crediting agreements have occurred with developers who construct a park at the outset and get paid back when the full funding is achieved. At Councillor Monette and Chair Hume’s request, staff will return with information on park development in terms of funding and timing.

· In regard to eligible services, social housing is permissible under the Development Charges Act and is included in this by-law, but only 90 per cent could be collected from development charges. Acquisition of land for parks is ineligible as this particular item is already covered under the Planning Act. The municipality can recover the cost through the tax base or through fees and charges.

· Cultural facilities became ineligible in 1997 when the Conservative government made changes to the Development Charges Act.

· For the most part, development charges were not used to construct the Orléans Art Center. The building was through a municipal capital facility agreement and was exempt from development charges. Council funded the five per cent park component. The high density housing proposed on the east side of the town center, next to a future transit station, received a 50 per cent break on the road related component of the development charges as an incentive.

· The York example was looked at in terms of forward averaging to establish a higher rate for transit; however, the province indicated that they would not re-open the Development Charges Act in this regard.

· The development community has raised the possibility of reducing development charges by providing such services as parks in advance. Staff are reviewing this model, predicated in Kanata West, with Parks and Recreation.

In response to further questions, Ian Cross, Program Manager of Research and Forecasting, explained that staff believe they have good grounds for thinking that the census undercounted, particularly in the central parts of the City of Ottawa. He assured the committee that the forecasts and analysis used by staff are based on building permit issuances and other data. He felt that the census issue is not a concern relative to the development charge review. Mr. Cross explained that a handout was prepared on the evolution of population and dwelling unit change in the Centertown area at the request of Mr. Casey. A footnote does acknowledge that the 2006 census number undercounts the actual dwelling units and population.

Councillor Wilkinson spoke against removing the exemption for places of worship, asking for staff to provide some rationale as to why particular exemptions are being removed. She commented on the valuable programs undertaken by churches, such as youth programs.

Tim Marc, Senior Legal Counsel, explained that there are two different approaches with respect to front ending. For roads, proponents would receive payment in the year that it was budgeted, while stormwater ponds are paid back as building permits are issued.

Councillor Doucet noted that the Comparative Municipal Fiscal Impact Analysis undertaken by Hemson Consulting Ltd. showed residents inside the Greenbelt pay approximately $1000 more than households outside. He hoped the review would address this imbalance. With respect to VKT, he opined that it should be simple and solely focused on cost, including transit. He felt that the City must figure out a way to structure these costs, to avoid a relentless wheel of subsidy.

Chair Hume, as President of the Association of Municipalities of Ontario, stated that they have received clear direction from the Premier that the government is not interested in entertaining changes to the Developmental Charges Act at this time. A special circumstance, like the York amendment, could be entertained if there is consensus from both government and industry.

Following questions from committee members on the presentation, the committee heard from public delegations.

Rob Price, Greater Ottawa Homebuilders Association (GOHBA), commenced by referencing a letter that was circulated and held on file. He noted that GOHA is represented on the stakeholders committee by B.N. Global and noted challenges moving forward, including the timeframe. Staff have begun meeting with B.N. Global on various service areas; however he suggested most of the costing that has been discussed and presented by staff has been done as though the report has already been approved. GOHA is also concerned with the exemption for social housing, suggesting it is a social matter not a growth issue. Secondly, the policy is based on the Transportation and Infrastructure Master Plans and the Official Plan, which are in the process of review. Third, no background information is available with respect to recommendation 3 to alter the allocation of road costs. He added that the same is true with regard to recommendation 4, as the report does not speak to the implications that go along with phasing out non-statutory exemptions. In summation, he stated that the City has known that this by-law has to be renewed every five years and the City is under the gun to have a new by-law in place by July 13, 2009. The association does not feel that there is enough time for meaningful dialogue. The current economic climate must also be kept in mind, as this process should not be viewed as an opportunity to generate additional revenues. Housing and the construction industry in its spin offs are probably the largest economic employer in the region. GOHA is willing to work with staff but time and appropriate analysis are necessary moving forward.

In response to questions from Councillor Leadman, Mr. Price confirmed GOHA is a member of the Stakeholders Group and meetings have already taken place. He suggested they have been more or less token consultations, as cost estimates were provided by the City without discussion or stakeholder analysis or input.

Councillor Leadman asked staff to comment on this statement, because the whole idea of consultation is to have input from stakeholders.

Mr. Mackay stated that he would not characterize the sessions as token meetings, noting staff and the consultant have put forward the list of projects that are being proposed to be funded by development charges. Mr. Baker has participated in a number of meetings over the last six weeks and there has been a lot of dialogue back and forth. Mr. Mackay added that he has been reading emails and taking calls on this matter. As for the timeline, he agreed that it is tight and there is a lot to be done; however, the issues paper does a good job of explaining the policy framework and the key drivers with respect to establishing the background study. Mr. Mackay added that it is a balancing act and the homebuilders may not agree with the project lists, but this is why a consultant is guiding the process.

Mr. Baker explained that the stakeholders group began meeting in September 2008, followed by subsequent meetings in October and November. The elements before committee were discussed with the GOHA on February 3, 2009 and changes were made to take into consideration issues raised by the industry. Additional meetings on roads and transit are planned for this afternoon and a meeting with the GOHA consultant is in the works. A draft background study will be presented in late March, after stakeholder feedback on a preliminary draft. The critical path for the process is set out in Document 3.

Mr. Price commented further on the timeframe and getting comprehensive analysis and feedback from the industry within four weeks in one of its busiest times of the year.

Chair Hume noted that one of the things discussed at the strategic planning session last week was establishing some project sponsors that would allow staff and a small subset of the committee to work together to bring forward reports. He advised that Ms. Schepers suggested that this matter could be the first and with the concurrence of the committee, Councillors Feltmate, Hume, Harder and Leadman were identified to assist staff as project sponsors on this file.

Doug Casey, Charlesfort Developments, indicated he is not a member of GOHA and did not participate in the preparation of this policy framework. He commented on the economic context and the City’s fiscal situation. He spoke against reintroducing development charges to the downtown and removing the exemption for churches. He spoke favourably with respect to exemptions for brownfield sites and affordable housing. Referencing a project at Kent and Lisgar, he advised that the new residential tower would bring in $1 million annually in taxes as compared to $34 thousand for the previous use. He suggested the City would not have increased costs as services are already provided in the area. With respect to Centretown, he noted the population has decreased from 35, 600 in 1941 to 24, 000 in 2006, suggesting development charges should not be reintroduced until the population numbers of 1941 are achieved. He noted Centretown has suffered over time with the construction of the Queensway and the widening of Kent Street, making the neighbourhood unfriendly for families. He added that more people must live downtown to support businesses and services. Mr. Casey explained that he does not currently own land found on Schedule E.

Chair Hume reiterated the need to look at other incentives to encourage growth in the downtown area.

Councillor Leadman noted that most, if not all, of the development occurring downtown is not family friendly and the population has decreased. She noted development in Westboro along Traditional Mainstreets have also not favoured families.

Mr. Casey rebutted that he thought that there was changing demographics with young and old choosing to live downtown. With respect to the population data, he noted development charges are intended to be tied to growth and the data shows population in Centretown well below 1941 levels.

In response to questions from Councillor Leadman, Mr. Baker advised that the development charge review does not look to the tax component. The review does involve benchmarking and best practices from other Ontario cities and the consultant retained by the City has worked with many other municipalities.

Mr. Mackay indicated that the review coincides with the approval of all master plans and the Official Plan. Staff are taking into consideration Council’s priorities and policy objectives. Specific to Centretown, Mr. Mackay noted that $2.1 million were exempted in the area, while major development occurred in non-exempted areas, such as the By Ward Market. The rates will be set as part of the second phase and recommendations will be made, keeping in mind the current economic context and rates set in other municipalities.

Mr. Marc advised that the July 14, 2009 deadline is legislated as five years from the passage of the previous by-law. He cautioned that if the City does not have a new by-law in place by that date, no development charges can be collected in the City of Ottawa and there is no opportunity to extend that date.

Councillor Doucet voiced that the review should lead to the creation of more multi-use, sustainable 24-7 living communities by developing a city that pays for itself. He spoke in support of keeping the exemption downtown, which has lead to some good intensification.

Councillor Hunter countered that development charges are disincentives for development, noting a parking spot in a new condo development downtown costs $40,000. He noted that downtown intensification does have a cost in terms of infrastructure capacity, notably as it relates to combined sewers. He also noted that many more people work downtown as compared to 1941.

Responding to comments from Councillor Wilkinson, Mr. Casey said it is very expensive to build downtown, including encroachment permits and the cost of land.

Councillor Wilkinson recalled that developers told her the land value went up immediately when the exemption area was approved for the downtown. She commented that the review must take a citywide approach.

Jim Burghout, Claridge Homes, addressed the removal of certain exemptions, touching on opportunity and obligation. He suggested the City has an opportunity to continue to use exemptions as an incentive to encourage the residential development in the target areas of the Official Plan, most notably in the downtown area where they have been in place for some time. The former City of Ottawa put in place a very aggressive incentive program for the downtown area in the mid 1990s that included development charges and fee exemptions. Mr. Burghout advanced that the program played a huge role in bringing Claridge and many others to the downtown. The projects started out small but as the economy got better, the projects got bigger and more sophisticated. Over the last five or six years, Claridge has built about 1, 000 units outside the exempted area, paying $6-7 million in development charges as the economy was good. Over that time, the company aggressively attempted to purchase some of the land in the exempt area with significant investment to do so by purchasing surface parking lots so that they can be developed. Mr. Burghout said the discussion about the population in Centretown is interesting because back in 1976 when the Centretown Official Plan was passed, they made reference to population. There’s a specific reference in the Centretown Secondary Plan, which is part of the Official Plan, which talks about a 50 per cent increase in population in Centretown if the policies of that plan are followed; however, it has not happened. He stated that development charge exemptions are by far the most effective and appealing incentives to a developer, as they are a direct capital cost affecting the bottom line.

With respect to the obligation part, Mr. Burghout reminded that Section 3.6.6 of the Official Plan speaks to the central area and specifically includes the adjacent residential neighbourhoods of Centretown and Sandy Hill. It states that in keeping with the strategic direction set out in Section 2, the City will encourage new infill dwelling in the central area and surrounding residential neighbourhoods by providing financial incentives such as exemptions from development charges, building permits fees or other development levies. He suggested that at the very least the present exemption area should remain so, but he thought that the opportunity exists to expand that area. He thought that the City should look into exemption or reduction for areas where rapid transit stations are located. He commented that it is critical that the new by-law be consistent with the directions of the new Official Plan and master plans, which is currently not the case.

After closing the public hearing, Chair Hume asked the committee to turn their attention back to the recommendations of the committee.

In response to questions from Councillor Leadman, Mr. Mackay advised that consultation will continue as part of the process to assist in the development of the background study. Consultation is also on-going on the list of projects.

Mr. Marc advised that staff needs some direction in order to be able to proceed and draw up a background study to present to Council. In the opinion of Legal Services, the approval of these recommendations would not give rise to the rules on revisiting an issue, should Council wish to take a different position when the report comes forward for formal adoption in June or July. In sum, there is an opportunity for Council to make adjustments later on in the process.

Councillors Feltmate and Hunter respectively presented and then withdrew the following motions dealing with Recommendation 4.

BE IT RESOLVED that places of worship and land in connection therewith and non-profit health and social services that have operational funding from the City continue to be exempt.

THAT consideration of discontinuing non-statutory exemptions be considered within up to two years after the passage of the by-law.

Mr. Marc clarified that exemptions are a straight loss to the City and must be made up from the tax base.

Following further legal advice, the Committee agreed to remove Recommendation 4 and directed staff to bring back, as part of the next step, a definitive list of exemptions.

Chair Hume also received concurrence to proceed with project sponsors on this matter with Councillors Feltmate, Harder, Hume and Leadman acting in that capacity.

That the Planning and Environment Committee recommend Council approve the policy framework underlying the update of the Development Charges Background Study as detailed in this report.

1. That Development Charge By-law be used to recover the full costs of eligible infrastructure;

2. That the costs continue to be allocated on a city-wide and area specific basis per Document 1 of this report;

3. That the distribution of arterial and collector road servicing costs be allocated based on Vehicle Kilometres Travelled (VKT);

4. ~~That non-statutory exemptions, unless they promote smart growth or affordable housing, be discontinued two-years after the passage of the by-law;~~

5. That the annual indexing of the various DC rates be adjusted to correspond to the date of the new Development Charge By-law adoption in 2009;

6. That the transition period for applying the new DC rates to building permits, that have been filed with the City prior to passage of the new by-law, be extended to December 31, 2009;

7. That going forward with the new Development Charges By-law, a cash-flow analysis be undertaken to determine the residential and non-residential charges;

8. That the repayment of front-ended projects be based on the schedule of timing identified in the cash-flow analysis;

9. That redevelopment credits expire five years after the issuance of a demolition permit.

CARRIED as amended

DIRECTIONS TO STAFF:

1. Staff will review the non-statutory exemptions and report back as part of the next report to committee in April 2009. (Recommendation 4 was not voted on and referred to staff as part of the review). The review should also outline and categorize the approximate $21 million of deferred infrastructure investment delayed due to the exemptions. Staff are to provide the percentage this represents with respect to overall development charges.

2. Staff will review and report on front-ending agreements, specifically with regard to timing and funding.

3. Staff will provide information with regard to the funding and timing of park development.

4. Staff will provide information on incentives, other than DC exemptions, to achieve policy objectives. The effectiveness and continued appropriateness of the downtown exemption area should be analyzed in this regard.

5. Staff will provide clarification with regard to the Vehicle Kilometres Traveled calculation as it relates to the Greenbelt.

[1] 3 Area-specific refers to Inside the Greenbelt vs. Outside the Greenbelt (including serviced rural) vs. Rural

The 3 Area-specific Rural allocation is variable on a service-specific basis for water and sanitary sewers.

Report to/Rapport au :

SUBJECT:

OBJET :

REPORT RECOMMENDATIONS

RECOMMANDATIONS DU RAPPORT

BACKGROUND

DISCUSSION

CONSULTATION

LEGAL/RISK MANAGEMENT IMPLICATIONS

FINANCIAL IMPLICATIONS

SUPPORTING DOCUMENTATION

DISPOSITION