CITY OF SAULT STE. MARIE 2016 DEVELOPMENT CHARGES BACKGROUND STUDY. Draft for Public Circulation and Comment

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1 CITY OF SAULT STE. MARIE 2016 DEVELOPMENT CHARGES BACKGROUND STUDY Draft for Public Circulation and Comment JUNE 8, 2016

2 CONTENTS Page 1. INTRODUCTION 1.1 Purpose of this Document Development Charges Background Summary of the Process ANTICIPATED DEVELOPMENT IN THE CITY OF SAULT STE. MARIE 2.1 Requirements of the Act Basis of Population, Household and Non-Residential Gross Floor Area Forecast Summary of Growth Forecast THE APPROACH TO CALCULATION OF THE CHARGE 3.1 Introduction Services Potentially Involved Local Service Policy Capital Forecast Treatment of Credits Eligible Debt and Committed Excess Capacity Existing Reserve Funds Deductions Reduction Required by Level of Service Ceiling Reduction for Uncommitted Excess Capacity Reduction for Benefit to Existing Development Reduction for Anticipated Grants, Subsidies and Other Contributions The 10% Reduction DEVELOPMENT CHARGE ELIGIBLE COST ANALYSIS BY SERVICE 4.1 Introduction Service Levels and 10-Year Capital Costs for City DC Calculation Administration Transit Services Parks and Recreation Services Library Services Roads and Related Services Fire Protection Services Police Services DEVELOPMENT CHARGE CALCULATION 5-1

3 CONTENTS Page 6. DEVELOPMENT CHARGE POLICY RECOMMENDATIONS AND DEVELOPMENT CHARGE BY-LAW RULES 6.1 Introduction Development Charge By-Law Structure Development Chare By-Law Rules Payment in any Particular Case Determination of the Amount of the Charge Application to Redevelopment of Land (Demolition and Conversion) Exemptions (full or partial) Phasing in Timing of Collection Indexing Other Development Charge By-Law Provisions Categories of Services for Reserve Fund and Credit Purposes By-law In-force Date Minimum Interest Rate Paid on Refunds and Charges for Inter-Reserve Fund Borrowing Other Recommendations BY-LAW IMPLEMENTATION 7.1 Public Consultation Process Introduction Public Meeting of Council Other Consultation Activity Anticipated Impact of the Charge on Development Implementation Requirements Introduction Notice of Passage By-law Pamphlet Appeals Complaints Credits Front-Ending Agreements Severance and Subdivision Agreement Conditions 7-5 APPENDICES A BACKGROUND INFORMATION ON RESIDENTIAL AND NON-RESIDENTIAL GROWTH FORECAST A-1 B LEVEL OF SERVICE B-1 C PROPOSED DEVELOPMENT CHARGE BY-LAW C-1 D LONG TERM CAPITAL AND OPERATING COST EXAMINATION D-1

4 1. INTRODUCTION

5 INTRODUCTION 1.1 Purpose of this Document This background study has been prepared pursuant to the requirements of the Development Charges Act, 1997 (DCA 1997) (s.10), and accordingly, recommends development charges and policies for the City of Sault Ste. Marie. The City retained (Watson) to undertake the Development Charges (DC) study process in early Watson worked with senior staff of the City in preparing this DC analysis and policy recommendations. This DC background study, containing the proposed DC by-law, will be distributed to members of the public in order to provide interested parties with sufficient background information on the legislation, the study s recommendations and an outline of the basis for these recommendations. This report has been prepared, in the first instance, to meet the statutory requirements applicable to the City s DC Background Study, as summarized in Chapter 3. It also addresses the forecast amount, type and location of growth (Chapter 2), the increase in capital needs to accommodate the anticipated development and calculation of the charges (Chapters 4 and 5), the requirement for rules governing the imposition of the charges (Chapter 6) and the proposed by-law to be made available as part of the approval process (Appendix C). In addition, the DC background study addresses post-adoption implementation requirements (Chapter 7) which are critical to the successful application of the new policy. 1.2 Development Charges Background The purpose of development charges is to recover the capital costs associated with the increase in need for services arising from residential and non-residential growth within a municipality. These capital costs are in addition to costs that would normally be contributed to or constructed as condition of a subdivision or consent agreement (e.g. internal roads, sewers, watermains, sidewalks, streetlights, etc.). Municipalities are empowered to impose these charges via the Development Charges Act. From approximately the mid-1950s, Ontario municipalities recovered growth-related capital costs through lot levies under the authority of the Planning Act, which evolved through OMB hearings. The first Development Charges Act (DCA, 1989) was enacted in 1989 and replaced the former lot levy regime. The DCA, 1989 standardized the practice and provided a time limited basis for appeal. In addition, the DCA, 1989 allowed development charges to be imposed for all municipal services; required the quantification of needs relative to historic levels of service and

6 measurement of such standards; related anticipated development to capital cost estimates; and imposed public process requirements, amongst others. A major overhaul of the Development Charges Act was undertaken in 1997 (i.e. DCA, 1997) which resulted in limitations being placed on eligible services, restrictions on levels of capital cost recovery and additional rules and regulations surrounding its approach and implementation. 1-2 On March 5, 2015, the Ministry of Municipal Affairs and Housing announced that, The government intends to introduce legislative amendments to the Development Charges Act and related provisions of the Planning Act". The Province has since given third reading to Bill 73, An Act to amend the Development Charges Act, 1997 and the Planning Act which provides more details into the intended changes to be made to the present development charges regime. These changes are anticipated to take effect January 1, 2016 and some modifications to this background study will be required at that time, however it is not anticipated that these changes will have a significant impact on the quantum of the charge or policies contained herein. 1.3 Summary of the Process The public meeting required under Section 12 of the DCA 1997, is anticipated to be scheduled for early Its purpose is to present the study to the public and to solicit public input on the proposed DC by-law. The meeting is also being held to answer any questions regarding the study s purpose and methodology. In accordance with the legislation, the DC Background Study and proposed DC by-law will be made available for public review on two weeks prior to the public meeting. The process to be followed in finalizing the report and recommendations includes: consideration of responses received prior to, at or immediately following the public meeting; and finalization of the study and Council consideration of the by-law, currently scheduled for early Figure 1-1 outlines the proposed schedule to be followed with respect to the development charge by-law adoption process.

7 1-3 FIGURE 1-1 SCHEDULE OF KEY DEVELOPMENT CHARGE PROCESS DATES FOR THE CITY OF SAULT STE. MARIE 1. Data collection, staff interviews, preparation of DC calculations January July Review of draft findings with Staff July 21, Preparation of Draft DC Background Study November, Statutory notice of Public Meeting Ad placed in newspaper(s) 5. DC Background study and proposed DC by-law available to public 20 clear days prior to Public Meeting January, Public Meeting of Council Late Council considers adoption of DC Background Study and passage of by-law 8. Newspaper notice given of by-law passage at a subsequent Council Meeting By 20 days after passage 9. Last day for by-law appeal 40 days after passage 10. City makes available DC pamphlet by 60 days after in force date

8 2. ANTICIPATED DEVELOPMENT IN THE CITY OF SAULT STE. MARIE

9 2. ANTICIPATED DEVELOPMENT IN THE CITY OF SAULT STE. MARIE Requirements of the Act Chapter 3 provides the methodology for calculating a development charge as per the DCA Figure 3-1 presents this methodology graphically. It is noted in the first box of the schematic that in order to determine the development charge that may be imposed, it is a requirement of Section 5 (1) of the DCA 1997 that the anticipated amount, type and location of development, for which development charges can be imposed, must be estimated. The growth forecast contained in this chapter (with supplemental tables in Appendix A) provides for the anticipated development for which the City of Sault Ste. Marie will be required to provide services, over a ten-year time horizon. 2.2 Basis of Population, Household and Non-Residential Gross Floor Area Forecast In compiling the growth forecast projections for the City of Sault Ste. Marie, the following items were consulted to help assess annual development activity over the forecast period: City of Sault Ste. Marie Official Plan Review 2008 The population projections contained in this report were reviewed when determining suitable 10-year population, housing and employment growth for the 2014 DC. The 10-year household forecast was largely based on the City s identified 10-year residential land supply (units); A review of historical development activity as well as the supply of units identified in the development approvals process; and Discussions with City staff regarding the anticipated residential and non-residential development trends for the City of Sault Ste. Marie. 2.3 Summary of Growth Forecast A detailed analysis of the residential and non-residential growth forecasts are provided in Appendix A. The discussion provided herein summarizes the anticipated growth for the City and describes the basis for the forecast. The results of the residential growth forecast analysis are summarized in Figure 2-1 below, and Schedule 1 in Appendix A.

10 2-2 FIGURE 2-1 HOUSEHOLD FORMATION-BASED POPULATION FORECAST MODEL DEMAND SUPPLY Historical Housing Construction Employment Market by Local Municipality, Economic Outlook Local, County and Provincial Forecast of Residential Units Residential Units in the Development Process Intensification Designated Lands Servicing Capacity Occupancy Assumptions Gross Population Increase Decline in Existing Population Net Population Increase

11 As identified in Table 2-1 and Schedule 1, the City s population is anticipated to reach approximately 77,810 by This represents an increase of approximately 1,965 persons and over the 10-year forecast periods. 1. Unit Mix (Appendix A Schedules 1 through 6) The unit mix for the City was derived from historical development activity (as per Schedule 6), residential land supply (as per Schedule 5), and discussions with planning staff regarding anticipated development trends for the City. Based on the above, the 10-year ( ) household growth forecast is comprised of a housing unit mix of approximately 63% low density (single detached and semi-detached), 3% medium density (multiples except apartments) and 34% high density (bachelor, 1 bedroom and 2 bedroom apartments). 2. Geographic Location of Residential Development (Appendix A Schedule 2) Schedule 2 summarizes the anticipated amount, type and location of development for the City of Sault Ste. Marie over the 10-year planning horizon. In accordance with forecast demand and available land supply, housing growth has been allocated to the following areas over the 2016 to 2026 forecast period: o Urban 97% o Rural - 3%. 2-3

12 2-4 Table 2-1 City of Sault Ste. Marie Residential Growth Forecast Summary Year Population (Excluding Census Undercount) Singles & Semi- Detached Housing Units Multiple Dwellings 1 Apartments 2 Other Total Households Person Per Unit (PPU) Historical Forecast Mid 2001 Mid 2006 Mid 2011 Early 2016 Early ,566 22,420 1,905 5, , ,948 22,285 2,310 7, , ,141 23,125 2,455 6, , ,847 23,516 2,502 6, , ,810 24,312 2,540 7, , Incremental Mid Mid , ,540 Mid Mid Mid Early Early Early , ,269 Source:, Includes townhomes and apartments in duplexes. 2. Includes bachelor, 1 bedroom and 2 bedroom+ apartments.

13 3. Planning Period Short- and longer-term time horizons are required for the D.C. process. The D.C.A. limits the planning horizon for certain services, such as parks, recreation and libraries, to a 10-year planning horizon. Roads and fire services utilize a longer planning forecast period. 4. Population in New Units (Appendix A - Schedules 3 and 4) The number of housing units to be constructed in the City of Sault Ste. Marie during the 10-year period is presented on Figure 2-2. Over the 10-year forecast period, the City is anticipated to average 127 new housing units per year. Population in new units is derived from Schedules 3, and 4, which incorporate historical development activity, anticipated units (see unit mix discussion) and average persons per unit by dwelling type for new units. Schedule 7 summarizes the average number of persons per unit (P.P.U.) for the new housing units by age and type of dwelling, based on 2011 custom Census data for the City. The total calculated P.P.U. for all density types has been adjusted to account for the downward P.P.U. trend which has been recently experienced in both new and older units, largely due to the aging of the population. Adjusted 20-year average P.P.U. s by dwelling type are as follows: o Low density: 2.80 o Medium density: 1.97 o High density: Existing Units and Population Change (Appendix A - Schedules 3, 4 and 5) Existing households as of 2016 are based on the 2011 Census households, plus estimated residential units constructed between 2011 and 2015, assuming a 6- month lag between construction and occupancy (see Schedule 3). The decline in average occupancy levels for existing housing units is calculated in Schedules 3 and 4, by aging the existing population over the forecast period. The forecast population decline in existing households over the 2016 to 2026 forecast period is estimated at approximately 1,

14 2-6 Figure 2-2 Annual Housing Forecast¹ Housing Units Years Historical Low Density Medium Density High Density Historical Average Source: Historical housing activity ( ) based on City of Sault Ste. Marie Planning Department building permits, based on Statsistics Canada data, Catalogue XIB 1. Growth Forecast represents calendar year.

15 6. Employment (Appendix A, Schedules 9a through 11) Employment projections are largely based on the activity rate method, which is defined as the number of jobs in a City divided by the number of residents. Key employment sectors include primary, industrial, commercial/ population-related, institutional, and work at home, which are considered individually below. The City s employment base by place of work is outlined in Schedule 9a. The 2011 employment base is comprised of the following sectors: o 135 primary (approx. <1%); o 1,180 work at home employment (approx. 4%); o 8,523 industrial (approx. 26%); o 12,763 commercial/population-related (approx. 38%); and o 10,785 institutional (approx. 32%). Schedule 9b, Appendix A, summarizes the employment forecast, excluding work at home employment, which is the basis for the D.C. employment forecast. The impact on municipal services from work at home employees has already been included in the population forecast. Accordingly, work at home employees have been removed from the D.C. employment forecast and calculation. Total employment for the City of Sault Ste. Marie (excluding work at home employment) is anticipated to reach approximately 33,315 by This represents an employment increase of approximately 840 additional jobs over the 10-year forecast period. 7. Non-Residential Sq.ft. Estimates (Gross Floor Area (G.F.A.)), Appendix A, Schedule 9b) Square footage estimates were calculated in Schedule 9b based on the following employee density assumptions: 2 o 1,200 sq.ft. per employee for industrial; o 500 sq.ft. per employee for commercial/population-related; and o 700 sq.ft. per employee for institutional employment. The Municipal-wide incremental non-residential G.F.A. increase is anticipated to be approximately 622,600 sq.ft. over the 10-year forecast period. In terms of percentage growth, the 10-year incremental G.F.A. forecast by sector is broken down as follows: o industrial approx. 43%; o commercial/population-related approx. 32%; and o institutional approx. 25% Employment is based on Statistics Canada 2011 Place of Work employment dataset. 2 Based on employment surveys across Southern Ontario.

16 3. THE APPROACH TO THE CALCULATION OF THE CHARGE

17 THE APPROACH TO THE CALCULATION OF THE CHARGE 3.1 Introduction This chapter addresses the requirements of s.s.5 (1) of the DCA 1997 with respect to the establishment of the need for service which underpins the development charge calculation. These requirements are illustrated schematically in Figure Services Potentially Involved Table 3-1 lists the full range of municipal service categories which are provided within the City. A number of these services are defined in s.s.2 (4) of the DCA 1997 as being ineligible for inclusion in development charges. These are shown as ineligible on Table 3-1. In addition, two ineligible costs defined in s.s.5 (3) of the DCA 1997 are computer equipment and rolling stock with an estimated useful life of (less than) seven years... In addition, local roads are covered separately under subdivision agreements and related means (as are other local services). Services which are potentially eligible for inclusion in the City development charge are indicated with a Yes. 3.3 Local Service Policy The development charge calculation commences with an estimate of the increase in the need for service attributable to the anticipated development, for each service to be covered by the bylaw. There must be some form of link or attribution between the anticipated development and the estimated increase in the need for service. While the need could conceivably be expressed generally in terms of units of capacity, s.s.5(1)3, which requires that Municipal Council indicate that it intends to ensure that such an increase in need will be met, suggests that a project-specific expression of need would be most appropriate. Some of the need for services generated by additional development consists of local services related to a plan of subdivision. As such, they will be required as a condition of subdivision agreements or consent conditions.

18 3-2 Figure 3-1 THE PROCESS OF CALCULATING A DEVELOPMENT CHARGE UNDER THE ACT THAT MUST BE FOLLOWED Anticipated Development 1. Tax Base, User Tax Rates, Base, User etc. Rates, etc. 2. Ineligible Services 2. Ineligible Services Estimated Increase in Need For Ceiling Re: Service Increased Need Subdivision Agreements Subdivision and Agreements Consent Provisions and Consent Provisions 7. Specified Local Services 7. Specified Local Services Needs That Will Be Met 5. DC Needs By Service 8. Examination of the Long Term Capital and Operating Costs For Capital Infrastructure 6. 1 Less: Uncommitted Excess Capacity 9. 2 Less: Benefit To Existing Devpt Less: Grants, Subsidies and Other Contributions 11. Financing, Inflation and Investment Considerations 14. DC Net Capital Costs Costs for new development vs. existing development for the term of the by-law and the balance of the period 13. Amount of the Charge By Type of Development (including apportionment of costs - residential and non-residential) Less: 10% Where Applicable DC By-law(s) Spatial Applicability Consideration of exemptions, Consideration phase-ins, of etc. exemptions, phase-ins, etc.

19 3-3 Table 3-1 Categories of Municipal Services To Be Addressed as Part of the Calculation CATEGORIES OF MUNICIPAL SERVICES ELIGIBILITY FOR INCLUSION IN THE DC CALCULATION SERVICE COMPONENTS MAXIMUM POTENTIAL DC RECOVERY % 1. Services Related to a Highway Yes Yes Local Yes Yes 1.1 Arterial roads 1.2 Collector roads 1.3 Local roads 1.4 Traffic signals 1.5 Sidewalks and streetlights Other Transportation Services Yes Yes Yes Yes Yes Yes n/a n/a 2.1 Transit vehicles 2.2 Other transit infrastructure 2.3 Municipal parking spaces - indoor 2.4 Municipal parking spaces - outdoor 2.5 Works Yards 2.6 Rolling stock Ferries 2.8 Airport facilities Storm Water Drainage and Control Services Local Local Local 3.1 Main channels and drainage trunks 3.2 Channel connections 3.3 Retention/detention ponds Fire Protection Services Yes Yes Yes 4.1 Fire stations 4.2 Fire pumpers, aerials and rescue vehicles 4.3 Small equipment and gear Outdoor Recreation Services (i.e. Parks and Open Space) Ineligible Yes Yes Yes Yes 5.1 Acquisition of land for parks, woodlots and ESAs 5.2 Development of area municipal parks 5.3 Development of district parks 5.5 Development of special purpose parks 5.6 Parks rolling stock 1 and yards Indoor Recreation Services Yes Yes 6.1 Arenas, indoor pools, fitness facilities, community centres, etc. (including land) 6.2 Recreation vehicles and equipment Library Services Yes Yes 7.1 Public library space (incl. furniture and equipment) 7.2 Library materials Electrical Power Services Ineligible Ineligible Ineligible 8.1 Electrical substations 8.2 Electrical distribution system 8.3 Electrical system rolling stock Provision of Cultural, Entertainment and Tourism Facilities and Convention Centres Ineligible Ineligible 9.1 Cultural space (e.g. art galleries, museums and theatres) 9.2 Tourism facilities and convention centres Waste Water Services Yes Yes Local 10.1 Treatment plants 10.2 Sewage trunks 10.3 Local systems with 7+ year life time 2 same percentage as service component to which it pertains computer equipment excluded throughout

20 3-4 CATEGORIES OF MUNICIPAL SERVICES ELIGIBILITY FOR INCLUSION IN THE DC CALCULATION SERVICE COMPONENTS MAXIMUM POTENTIAL DC RECOVERY % 11. Water Supply Services Yes Yes Local 11.1 Treatment plants 11.2 Distribution systems 11.3 Local systems Waste Management Services Ineligible Ineligible Ineligible 12.1 Collection, transfer vehicles and equipment 12.2 Landfills and other disposal facilities 12.3 Other waste diversion facilities Police Services Yes Yes Yes 13.1 Police detachments 13.2 Police rolling stock Small equipment and gear Homes for the Aged Yes 14.1 Homes for the aged space Day Care Yes 15.1 Day care space Health Yes 16.1 Health department space Social Services Yes 17.1 Social service space Ambulance Yes Yes 18.1 Ambulance station space 18.2 Vehicles Hospital Provision Ineligible 19.1 Hospital capital contributions 20. Provision of Headquarters for the General Administration of Municipalities Ineligible Ineligible Ineligible 20.1 Office space (all services) 20.2 Office furniture 20.3 Computer equipment Other Services Yes Yes 21.1 Studies in connection with acquiring buildings, rolling stock, materials and equipment, and improving land 2 and facilities, including the DC background study cost 21.2 Interest on money borrowed to pay for growth-related capital Capital Forecast Paragraph 7 of s.s.5(1) of the DCA 1997 requires that the capital costs necessary to provide the increased services must be estimated. The Act goes on to require two potential cost reductions and the Regulation sets out the way in which such costs are to be presented. These requirements are outlined below. 1 with 7+ year life time 2 same percentage as service component to which it pertains computer equipment excluded throughout

21 These estimates involve capital costing of the increased services discussed above. This entails costing actual projects or the provision of service units, depending on how each service has been addressed. 3-5 The capital costs include: a) costs to acquire land or an interest therein (including a leasehold interest); b) costs to improve land; c) costs to acquire, lease, construct or improve buildings and structures; d) costs to acquire, lease or improve facilities including rolling stock (with useful life of 7 or more years), furniture and equipment (other than computer equipment), materials acquired for library circulation, reference or information purposes; e) interest on money borrowed to pay for the above-referenced costs; f) costs to undertake studies in connection with the above-referenced matters; and g) costs of the development charge background study. In order for an increase in need for service to be included in the DC calculation, Municipal Council must indicate...that it intends to ensure that such an increase in need will be met (s.s.5 (1)3). This can be done if the increase in service forms part of a Council-approved Official Plan, capital forecast or similar expression of the intention of Council (O.Reg. 82/98 s.3). The capital program contained herein reflects the City s approved and proposed capital budgets and master servicing/needs studies. 3.5 Treatment of Credits Section 8 para. 5 of O.Reg. 82/98 indicates that a development charge background study must set out, the estimated value of credits that are being carried forward relating to the service. s.s.17 para. 4 of the same Regulation indicates that,... the value of the credit cannot be recovered from future development charges, if the credit pertains to an ineligible service. This implies that a credit for eligible services can be recovered from future development charges. As a result, this provision should be made in the calculation, in order to avoid a funding shortfall with respect to future service needs. As the City does not have an existing DC by-law, no outstanding DC credit obligations exist for consideration in the calculation of the charge. 3.6 Eligible Debt and Committed Excess Capacity Section 66 of the DCA 1997 states that for the purposes of developing a development charge bylaw, a debt incurred with respect to an eligible service may be included as a capital cost, subject to any limitations or reductions in the Act.

22 In order for such costs to be eligible, two conditions must apply. First, they must have funded excess capacity which is able to meet service needs attributable to the anticipated development. Second, the excess capacity must be committed, that is, either before or at the time it was created, Council must have expressed a clear intention that it would be paid for by development charges or other similar charges. For example, this may have been done as part of previous development charge processes Existing Reserve Funds Section 35 of the DCA 1997 states that: The money in a reserve fund established for a service may be spent only for capital costs determined under paragraphs 2 to 8 of subsection 5(1). There is no explicit requirement under the DCA 1997 calculation method set out in s.s.5(1) to net the outstanding reserve fund balance as part of making the DC calculation; however, s.35 does restrict the way in which the funds are used in future. For services which are subject to a per capita-based, service level cap, the reserve fund balance should be applied against the development-related costs for which the charge was imposed, once the project is constructed (i.e. the needs of recent growth). This cost component is distinct from the development-related costs for the next 10 year period, which underlie the DC calculation herein. The alternative would involve the municipality spending all reserve fund monies prior to renewing each by-law, which would not be a sound basis for capital budgeting. Thus, the City will use these reserve funds for the City s cost share of applicable development-related projects, which are required but have not yet been undertaken, as a way of directing the funds to the benefit of the development which contributed them (rather than to future development, which will generate the need for additional facilities directly proportionate to future growth). As the City does not have an existing DC by-law, no reserve funds exist at this time for consideration in the calculation of the charge. 3.8 Deductions The DCA 1997 potentially requires that five deductions be made to the increase in the need for service. These relate to: The level of service ceiling; Uncommitted excess capacity; Benefit to existing development;

23 3-7 Anticipated grants, subsidies and other contributions; and 10% reduction for certain services. The requirements behind each of these reductions are addressed as follows: Reduction Required by Level of Service Ceiling This is designed to ensure that the increase in need included in 3.2 does not include an increase that would result in the level of service (for the additional development increment) exceeding the average level of the service provided in the municipality over the 10-year period immediately preceding the preparation of the background study O.Reg (s.4) goes further to indicate that both the quantity and quality of a service shall be taken into account in determining the level of service and the average level of service. In many cases, this can be done by establishing a quantity measure, in terms of units of floor area, land area or road length per capita and a quality measure, in terms of the average cost of providing such units based on replacement costs, engineering standards or recognized performance measurement systems, depending on circumstances. When the quantity and quality factor are multiplied together, they produce a measure of the level of service, which meets the requirements of the Act, i.e. cost per unit. The average service level calculation sheets for each service component in the DC calculation are set out in Appendix B Reduction for Uncommitted Excess Capacity Paragraph 5 of s.s.5(1) requires a deduction from the increase in the need for service attributable to the anticipated development that can be met using the City s excess capacity, other than excess capacity which is committed (discussed above in 3.6). Excess capacity is undefined, but in this case must be able to meet some or all of the increase in need for service, in order to potentially represent a deduction. The deduction of uncommitted excess capacity from the future increase in the need for service, would normally occur as part of the conceptual planning and feasibility work associated with justifying and sizing new facilities, e.g. if a road widening to accommodate increased traffic is not required because sufficient excess capacity is already available, then widening would not be included as an increase in need, in the first instance.

24 Reduction for Benefit to Existing Development This step involves a further reduction to the need, by the extent to which such an increase in service would benefit existing development. The level of services cap in 3.4 is related, but is not the identical requirement. Sanitary, storm and water trunks are highly localized to growth areas and can be more readily allocated in this regard than other services such as roads which do not have a fixed service area. Where existing development has an adequate service level, which will not be tangibly increased by an increase in service, no benefit would appear to be involved. For example, where expanding existing library facilities simply replicates what existing residents are receiving, they receive very limited (or no) benefit as a result. On the other hand, where a clear existing service problem is to be remedied, a deduction should be made, accordingly. In the case of services such as recreation facilities, community parks, libraries, etc., the service is typically provided on a municipal-wide system basis. For example, facilities of the same type may provide different services (i.e. leisure pool vs. competitive pool), different programs (i.e. hockey vs. figure skating) and different time availability for the same service (i.e. leisure skating available on Wednesday in one arena and Thursday in another). As a result, residents will travel to different facilities to access the services they want at the times they wish to use them, and facility location generally does not correlate directly with residence location. Even where it does, displacing users from an existing facility to a new facility frees up capacity for use by others and generally results in only a very limited benefit to existing development. Further, where an increase in demand is not met for a number of years, a negative service impact to existing development is involved for a portion of the planning period Reduction for Anticipated Grants, Subsidies and Other Contributions This step involves reducing the capital costs necessary to provide the increased services by capital grants, subsidies and other contributions made or anticipated by Council and in accordance with various rules such as the attribution between the share related to new vs. existing development. (i.e. some grants and contributions may not specifically be applicable to growth or where Council specifically targets fundraising as a measure to offset impacts on taxes.) O.Reg (s.6) The 10% Reduction Paragraph 8 of s.s.(1) of the DCA 1997 requires that, the capital costs must be reduced by 10 percent. This paragraph does not apply to water supply services, waste water services, storm water drainage and control services, services related to a highway, police and fire protection services. The primary services that the 10% reduction does apply to include parks, recreation,

25 libraries, childcare/social services, Provincial Offences Act, ambulance, homes for the aged, health and transit. 3-9 The 10% is to be netted from the capital costs necessary to provide the increased services, once the other deductions have been made, as per the infrastructure costs sheets in Chapter 4.

26 4. DEVELOPMENT CHARGE ELIGIBLE COST ANALYSIS BY SERVICE

27 DEVELOPMENT CHARGE ELIGIBLE COST ANALYSIS BY SERVICE 4.1 Introduction This chapter outlines the basis for calculating development charge eligible costs for the development charges to be applied on a uniform basis, and for water and wastewater services which will be applied on an area-specific basis within the urban serviced area. In each case, the required calculation process set out in s.5(1) paragraphs 2 to 8 in the DCA 1997, and described in Chapter 3, was followed in determining DC eligible costs. The nature of the capital projects and timing identified in the chapter reflects Council s current intention. However, over time, municipal projects and Council priorities change and accordingly, Council s intentions may alter, and different capital projects (and timing) may be required to meet the need for services required by new growth. 4.2 Service Levels and 10-Year Capital Costs for City DC Calculation This section evaluates the development-related capital requirements for all of the softer services over a ten-year planning period. Each service component is evaluated on two format sheets: the average historical ten-year level of service calculation (see Appendix B), which caps the DC amounts and the infrastructure cost calculation, which determines the potential DC recoverable cost Administration Services The DCA 1997 permits the inclusion of studies undertaken to facilitate the completion of the City s capital works program. The City has made provision for the inclusion of new studies undertaken to facilitate this DC process, as well as other studies which benefit growth (in whole or in part). The listing of studies included in the DC, and summarized in the following table, include the 5- year reviews of the DC Background Study and Official Plan. The cost of these projects totals $158,600 over the 10-year forecast period, of which $25,000 is deducted as an existing benefit. A further $13,360 has been deducted for 90% services under the Act. As a result, the net growth-related capital costs included in the charge total $120,240. The net growth-related costs have been allocated 70% residential and 30% non-residential based on the incremental growth in population to employment, for the 10-year forecast period.

28 4-2 Infrastructure Costs Covered in the D.C. Calculation City of Sault Ste. Marie Service: Administration Studies Less: Less: Potential D.C. Recoverable Cost Increased Service Needs Attributable to Grants, Subsidies Post Other Non- Project Timing Gross Capital Other Net Capital Residential Anticipated Development Benefit to and Other Period Subtotal (e.g. 10% Residential Number (year) Cost Estimate Deductions Cost Existing Contributions Total Share Benefit Statutory Share Development Attributable to New Deduction) Development 70% 30% 1 DC Background Studies (2) 2015/20 58,600-58,600-58,600 5,860 52,740 36,922 15,818 2 Official Plan Review (2) 100, ,000 25,000 75,000 7,500 67,500 47,255 20, Total 158, ,600 25, ,600 13, ,240 84,177 36,063

29 Transit Services The City currently provides transit services within its jurisdiction. In providing this service, the City utilizes an inventory of assets including facilities, vehicles and equipment. The City s level of service over the historic 10-year period ( ) averages approximately $269/capita. When applied to the anticipated development over the forecast period, this average level of service translates into a DC-eligible amount of approximately $528,440. The total gross capital cost estimates for transit services over the 10-year forecast period are approximately $1.9 million. These capital costs include a second bus terminal in the north central area, transit maintenance facility and planned parabus expansion. These projects will benefit existing and future growth equally, and as such approximately $1.8 million in capital has been deducted as a benefit to existing. This results in net growth-related capital costs for inclusion in the calculation of $47,369. The net growth-related costs have been allocated 70% residential and 30% non-residential based on the incremental growth in population to employment, for the 10- year forecast period Parks and Recreation Services The City s inventory of parkland amenities, developed trails and walkways and parks maintenance vehicles provide a historic 10-year average level of service equal to $409/capita. In addition to the parkland assets, the City also provides recreational facility space and vehicles with an invested level of service standard of $968/capita over the prior 10-year period. In total the maximum DC-eligible amount for parks and recreation services is $2.7 million based on the established level of service standards. The 10-year capital needs for parks and recreation services to accommodate growth have a total gross capital cost of approximately $14.8 million. These capital needs include additional parkland development (MacDonald, Esposito and Strathclair), Hub Trail development, phase 3 development of the Northern Community Centre and provision for additional rolling stock. Approximately 45% of the Northern Community Centre project has been identified as a postperiod benefit for growth beyond the forecast period. Also, a benefit to existing development deduction of $4.3 million has been provided reflecting the replacement of existing recreation facility space and benefits to current residents. The statutory 10% deduction applicable for parks and recreation services totals approximately $270,000, resulting in net growth-related capital costs for inclusion in the calculation of $2.4 million. As the predominant users of parks and recreation services tend to be residents of the municipality, the forecast growth-related costs have been allocated 95% to residential and 5% to nonresidential.

30 4-4 Infrastructure Costs Covered in the D.C. Calculation City of Sault Ste. Marie Service: Transit Services Less: Less: Potential D.C. Recoverable Cost Increased Service Needs Attributable to Grants, Subsidies Post Other Non- Project Timing Gross Capital Net Capital Residential Anticipated Development Benefit to and Other Period Subtotal (e.g. 10% Residential Number (year) Cost Estimate Cost Existing Contributions Total Share Benefit Statutory Share Development Attributable to New Deduction) Development 70% 30% 1 Second Bus Terminal in North Central Area , , ,378 12,622 12,622 8,836 3,786 2 Maintenance Facility (transit maintenance) , , ,899 19,601 19,601 13,722 5,879 3 ParaBus Expansion , , ,854 15,146 15,146 10,603 4, Total 1,876,500-1,876,500 1,829,131-47,369-47,369 33,162 14,207

31 4-5 Infrastructure Costs Covered in the D.C. Calculation City of Sault Ste. Marie Service: Parks and Recreation Services Less: Less: Potential D.C. Recoverable Cost Increased Service Needs Attributable to Grants, Subsidies Level of Other Non- Project Timing Gross Capital Post Period Net Capital Residential Anticipated Development Benefit to and Other Service Cap Subtotal (e.g. 10% Residential Number (year) Cost Estimate Benefit Cost Existing Contributions Total Share Adjustment Statutory Share Development Attributable to New Deduction) Development 95% 5% 1 MacDonald Park (playground equipment) 20,000-2, ,162-5,000 12,162 1,216 10,945 10, Strathclair Park (parkland development) 450,000-54, , , ,125 23, , ,032 10,581 3 Esposito Park (bike pump track) 250,000-28, , , ,616 12, , ,982 5,473 4 Hub Trail Engineering and Design 50, ,761 48,738 1, Hub Trail and Cycling Master Plan Development 1,000,000-4, , ,757 20,467 2,047 18,420 17, Provision for Additional Rolling Stock (1) 32,500-6,150 26,350-26,350 2,635 23,715 22,529 1,186 7 Northern CC - Phase 3 (87,370 sq.ft.) 13,000,000 5,877, ,294 6,589,106 4,304,093 2,285, ,501 2,056,511 1,953, , Total 14,802,500 5,877, ,557 8,294,343 5,327, ,000 2,701, ,176 2,431,580 2,310, ,579

32 Library Services The City provides library services through three branches, i.e. Main, Korah and Churchill. The library facility space within the municipality totals 45,014 square feet and contains approximately 239,000 circulation items available to the City s residents. The historical level of service for library averages $231/capita over the previous 10-year period. Based on this service standard, the City would be eligible to collect approximately $453,000 from DCs for library facility space and collection materials over the ten year forecast period. Based on the City s 10-year plan it is anticipated that a new Churchill Library branch would be constructed, providing additional space for future development. Moreover, to maintain the City s historical level of service for collection materials, approximately 6,100 additional items would be purchased during the forecast period. The gross capital cost for the library needs total approximately $3.1 million. The benefit to existing development, through the replacement of the existing Churchill facility provides for a deduction of $2.7 million. Also, $34,833 has been deducted for the statutory 10% requirement. On a net cost basis, $313,499 has been included in the DC calculation for library facility services based on the 10 year growth projections. Similar to parks and recreation services, library usage is predominately residential-based with some use of the facilities and materials by non-residential users, for the purposes of research and training. To acknowledge this use the growth-related capital costs have been allocated 95% residential and 5% non-residential Roads and Related Services The City has a current inventory of 136 road kilometers, excluding internal local roads. This historic level of infrastructure investment equates to a $6,933/capita level of service. When applied to the forecast growth to 2026, a maximum DC-eligible cost of $13.6 million could be expected to meet future increase in needs for service. In addition to roadways, the City s engineering services operate a public works facility of approximately 109,300 square feet and 60 items of vehicles and equipment. In this regard a historic average level of service of $208 per capita has been provided, resulting in DC-eligible cap room of approximately $408,000. Review of the City s roads needs for the forecast period, identify approximately $27.3 million in gross capital costs. These capital needs include road extension, widening and reconstruction projects, property protection for future works to facilitate future development, additional facility space of 2,060 sq.ft., and additional rolling stock items. Recognizing the benefit to existing development through the resurfacing/replacement of existing infrastructure at the time of addressing growth needs, $18.3 million has been deducted. A further $360,000 has been deducted to reflect anticipated Provincial funding contribution towards the Black Rd. widening project. As a result, $5.7 million in capital needs have been included in the DC calculation.

33 4-7 Infrastructure Costs Covered in the D.C. Calculation City of Sault Ste. Marie Service: Library Services Less: Less: Potential D.C. Recoverable Cost Increased Service Needs Attributable to Grants, Subsidies Post Other Non- Project Timing Gross Capital Other Net Capital Residential Anticipated Development Benefit to and Other Period Subtotal (e.g. 10% Residential Number (year) Cost Estimate Deductions Cost Existing Contributions Total Share Benefit Statutory Share Development Attributable to New Deduction) Development 95% 5% 1 New Churchill Branch ,000,000-3,000,000 2,744, ,600 25, , ,538 11,502 2 Additional Collection Materials 92,732-92,732-92,732 9,273 83,459 79,286 4, Total 3,092, ,092,732 2,744, ,332 34, , ,824 15,675

34 4-8 Infrastructure Costs Covered in the D.C. Calculation City of Sault Ste. Marie Service: Transportation Services Less: Potential D.C. Recoverable Cost Grants, Subsidies Non- Project Increased Service Needs Attributable to Anticipated Development Timing Gross Capital Post Period Net Capital Benefit to and Other Residential Residential Number (year) Cost Estimate Benefit Cost Existing Contributions Total Share Share Development Attributable to New Development 70% 30% 1 Second Ln. and Great Northern Road - property protection 500, , ,000 50, , ,021 89,979 2 Second Ln. and Carmen's Way - property protection 500, , ,000 50, , ,021 89,979 3 Third Ln. and Black Rd. (hospital entrance to second line) 10,900, ,333 10,536,667 9,810, , , ,948 4 Black Rd. (Second Ln. to McNabb) - widening ,350, ,000 4,869,000 3,907, , , , ,669 5 Northern Ave. Extension (E. Limit to Black Rd.) - new construction 5,700,000 1,014,000 4,686,000 2,658,000 2,028,000 1,419, ,255 6 Sackville Rd. Extension to Third Ln. 2017/18 4,000, ,579 3,288,421 1,865,263 1,423, , , Provision for Additional Facility Space (2,060 sq.ft.) 224, , , ,446 67,454 8 Provision for Additional Vehicles (1) 99,200-99,200-99,200 69,447 29, Total 27,274,100 2,869,912 24,404,188 18,340, ,626 5,704,298 3,993,416 1,710,883

35 The net growth-related costs for roads and related services have been allocated between residential and non-residential development on the basis of incremental population to employment growth over the forecast period Fire Protection Services The City currently has four fire stations which supply 48,254 square feet of building space. The fire department also has a current inventory of 22 vehicles and 168 items of capital equipment. In total, the inventory of fire protection assets provides a historic average level of service of $239 per capita. The historic level of investment in fire services provides for a DC-eligible amount over the forecast period of approximately $469,000. Based on the department s capital plan, the City will require equipment for four additional firefighters, four additional EMS and one additional fire prevention officer. In total, the capital costs for fire services over the 10-year period is $38,200. The allocation of net growth-related costs for fire protection services between residential and non-residential development is 74% residential and 26% non-residential based on respective net developable land areas over the forecast period to Police Services The City currently has one police station, including storage space, which supplies 46,113 square feet of building space. The police department also has a current inventory of 13 vehicles, with a useful life of 7 years or greater, and 398 items of capital equipment. In total, the inventory of police service assets provides a historic average level of service of $189 per capita. The historic level of investment in police services provides for a DC-eligible amount over the forecast period of approximately $370,000. No additional capital needs have been identified for police services to accommodate the anticipated growth over the period.