City of London Development Charges Background Study. April 2009

Transcription

1 City of London Development Charges Background Study April 2009

2 ii Table of Contents 1 CHAPTER 1 - EXECUTIVE SUMMARY CHAPTER 2 - DEVELOPMENT CHARGES PURPOSE AND STUDY PROCESS CHAPTER 3 - CALCULATION OF THE DEVELOPMENT CHARGE RATE 19 4 CHAPTER 4 THE DEVELOPMENT CHARGE BY-LAW...36 APPENDIX A - GROWTH FORECASTS...39 APPENDIX B FIRE SERVICES...47 APPENDIX C POLICE SERVICES...61 APPENDIX D CORPORATE GROWTH STUDIES...73 APPENDIX E LIBRARY SERVICES...78 APPENDIX F PARKS AND RECREATION...90 APPENDIX G TRANSIT APPENDIX H MAJOR TRANSPORTATION ROADWORKS - CSRF FUNDED143 APPENDIX I MINOR TRANSPORTATION ROADWORKS UWRF FUNDED156 APPENDIX J - SANITARY SEWERS, POLLUTION CONTROL PLANTS, AND OTHER FACILITIES- CSRF FUNDED APPENDIX K OVERSIZED SANITARY SEWERS UWRF FUNDED APPENDIX L WATER DISTRIBUTION AND SUPPLY SYSTEM APPENDIX M STORMWATER MANAGEMENT WORKS - CSRF FUNDED 186 APPENDIX N STORM SEWERS / STORMWATER MANAGEMENT WORKS - UWRF FUNDED APPENDIX O EXAMINATION OF OPERATING COSTS APPENDIX P TERMS OF REFERENCE FOR UWRF/DC IMPLEMENTATION TEAM FOR THE 2008 DEVELOPMENT CHARGE STUDY APPENDIX Q EXCERPTS OF CITY OF LONDON OFFICIAL PLAN WITH RESPECT TO GROWTH FINANCING POLICIES NOTES 225

3 1 1 Chapter 1 - Executive Summary Development Charges provide a method for municipalities to recover cost associated with growth. In Ontario, the Development Charges Act, 1997 governs the calculation of rates and collection of charges. The Act also dictates that a background study be completed which in general terms, demonstrates that the charges were calculated in accordance with the legislation. The process used to calculate development charges begins with a growth forecast. How the growth forecasts were compiled is described in Appendix A. From this growth forecast, service needs associated with growth were compiled. Capital needs are routinely projected by all service delivery departments. In most areas, the capital needs were compiled with the help of an external consultant. Care was taken to ensure that the needs identified did not exceed existing historical standards in each service area affected by this legislative requirement. Once the capital needs arising from projected growth was determined, the process of computing development charge rates ensued. This process included: Estimating costs and timing of growth needs Applying statutory deductions to the estimated growth costs (including allocation of costs to existing development, deductions associated with an improvement in service standard, deduction for grants or other capital funding sources attributable to the growth projects, and the statutory 10% deduction for certain soft services, namely Parks, Recreation, Library and Transit, Growth Studies) Allocating the resulting net cost amongst benefiting forms of development (residential, commercial, institutional, and industrial) From the resulting net cost attributed to each form of development, existing reserve fund balances are taken into account and preliminary rates (excluding financing costs) are calculated. The calculations also involve a cash flow analysis that incorporates existing reserve fund balances, projected revenues and fund draws. From the cash flow analysis, financing costs associated with the growth plan are estimated, and incorporated into the rate calculations. This study has benefited from consultation with numerous stakeholders. The UWRF/DC Implementation Team (comprised of representatives from development industry [London Development Institute], construction trades [London District Building and Construction Trades Council] and taxpayer interests [Urban League] met on approximately a dozen occasions during the course of the study to monitor progress, review estimates and assumptions and discuss interim observations. Subgroups met where there was a need to review data and observations in more detail. Numerous City staff in positions responsible for planning service delivery provided information necessary for calculation of existing service levels, growth forecasts and growth related capital needs. The objective at the outset was to conduct a consultative process where information pertinent to rate calculations was freely available for scrutiny and debate.

4 2 During the course of the study, economic activity in the building industry has shifted dramatically. When the study was undertaken in the early part of 2007, construction activity was at a peak. As this study draws to a close, the economic activity for this important industry has shifted dramatically. The objective of this study throughout has remained consistent to calculate the most accurate development charge rate possible under all the long term growth assumptions and with regard to the requirements of the underlying statute. This study incorporates all growth needs associated with development into one document. The scope of the engineered works in the study includes both primary facilities arterial roads, large trunk works (sanitary and storm), sanitary treatment facilities, storm water management facilities, and water supply and distribution facilities as well as more local works that serve community areas (minor road works, sewers and storm water management facilities). These latter works have been historically referred to as Urban Works and conform to the rate calculation approach required under the legislation. In comparison to the 2004 DC study, the scope of the Urban Works incorporated into this study has been narrowed, in favour of an approach that would see the more of these works budgeted by the City. In essence, this represents a shift of funding approach for certain works from Urban Works to City Services. This shift is consistent with the recommendations of the Blue Ribbon panel (October, 2006), which recommended this as a means for the City to address a mounting backlog of claims against the Urban Works Reserve Fund. The changes to the fund operation will be gradual, as many Urban Works remain to be completed under terms of subdivision and development agreements between the proponent and the City. Another change to the existing UWRF approach espoused in this document will see a local share for certain future works previously fully funded from the UWRF fund now assessed against the proponent developer. The details of the development charge rate calculations are contained in appendices to this study one for each service. Chapter 3 provides summary information of all capital needs, allocations to growth and non-growth, allocations to benefiting types of development and rate calculations. This study reflects rates that are computed within the bounds of the governing statute. The development charge rates reflected in this study are a reasonable representation of the anticipated costs resulting from projected growth, over the planning horizon used to predict the need, for each service.

5 3 The full calculated rates are contained in Tables 3-2 & 3-3. The recommended rates resulting from this study are summarized in the Table below. Development category Recommended Existing rate Rate ( ² ),(3) January 1, 2009 Single family residential rate $22,921 / unit $17,005/ unit Commercial $ /sq.m. $217.77/ sq.m. Institutional $ / sq.m. $117.37/ sq.m. Industrial (1) (1) No charge for industrial development in existing DC by-law, as confirmed by Council in December, (2) Recommended Rates excludes Water Supply component for all categories. Existing rate does not include that component either. (3) For non-residential rates, Recommended Rates include charges for soft services (Fire, Police, Parks and Recreation, Transit, Library, Corporate Growth Studies). Comparable existing rates exclude these components. Vic Coté General Manager of Finance and Corporate Services and Acting City Treasurer April 20, 2009

6 4 2 Chapter 2 - Development Charges Purpose and Study Process Development charges have been collected in Ontario since the 1960 s. Their general purpose is to provide a pool of funds to finance capital works to facilitate and to serve growth. The facilitation of development is a fundamental aspect of municipal government. In executing this role, the City must adequately plan the financing of the significant costs associated with growth. It does so in part, through the research, calculation and adoption of development charge rates. These rates provide an important source of financing for engineered services (or hard services ) including road, water and sewer infrastructure, as well as the expansion of Fire, Police, Parks, Recreation, Library and Transit service capacity ( soft services ). These services are all required for urban development. 2.1 Purpose of the Development Charge Study In Ontario, the provincial government regulates the setting of development charge rates through the Development Charges Act, This development charges background study has been prepared to meet the requirements of that legislation. It is intended to comprehensively explain the City of London s approach to the calculation of the rates and to otherwise meet the standards of the Development Charges Act, Development Charge rates are invoked and administered by by-law. In order to replace the expiring by-laws in a timely manner, the City initiated a review process in The process was designed to include: o stakeholder consultation o the completion of the background study (which is prerequisite to adopting a new bylaw), o and a public meeting (also required by the legislation) The process will conclude with the adoption of a new development charge by-law, replacing the existing by-law C.P (as amended), and will establish new rates that are reflective of the capital requirements associated with the growth forecasts. 2.2 City of London Growth Financing Policy Policies provide for orderly growth and development, and compatibility between the many different uses of land within the City of London. The policies also address the City s objectives with respect to financing of growth. Among the most significant of the policies in this regard are: OP Section Growth Management Principles vii) that the implications of new development for the financial health of the municipality will be assessed and that growth related costs will be financed from revenues generated from growth; OP Growth Financing Policies The financing requirements to service new development should not jeopardize the long term financial health of the municipality or place an undue burden on existing taxpayers. The following growth financing policies are intended to achieve these objectives: i) Growth related capital costs will be recovered from revenues generated from new development...

7 5 iii) The City will consider, as part of the area study process, the involvement of the private sector in the development, operation, construction and financing of long term servicing infrastructure... v) The City may explore alternatives for the financing of oversizing costs (that portion of servicing projects that have been sized to accommodate growth beyond the planning period) until these costs and related interest carrying costs can be recovered from future development... OP Growth Servicing Policies The City of London will plan the provision of services to accommodate growth so that servicing is timely, cost efficient, environmentally sound, consistent with long term servicing plans and within the financial means of the municipality. Servicing subject to this strategy includes physical infrastructure such as sanitary sewerage works, storm drainage works, water supply and distribution, and road works. It also includes the provision of community facilities and services including parks and recreation facilities, libraries, public transit, and fire and police services... A more complete compilation of the Official Plan policies as they relate to growth management and financing can be found in Appendix Q. 2.3 City of London Development Charge Policy In London, the term development charges is used to describe charges collected in the City Services Reserve Fund (CSRF) and the Urban Works Reserve Fund (UWRF). Both funds are used to finance growth related works, but their purposes are different, as reflected in the following table: Listing of Services recovered through DC s and Exempted Services under current DC by-law (expires Aug, 2009) Works currently Exempted Works currently funded through Urban Works Reserve Funds Works currently funded through City Services Reserve Funds (L-legislative exemption; or C- City currently does not collect a DC for these, by policy) Minor Roadworks traffic lights, road channelization, sidewalks, street lights, bike paths Sanitary Sewers collection pipes generally serving areas >30 hectares (includes works potentially costing up to $4M) Arterial Road expansion & Rural Rd upgrade to urban standard Water trunk line pipes and supply capacity Sanitary Sewers trunk collection pipes and treatment capacity (C) -Water Supply capacity provided by Lake Huron or Lake Erie joint water supply board

8 6 Listing of Services recovered through DC s and Exempted Services under current DC by-law (expires Aug, 2009) Works currently Exempted Works currently funded through Urban Works Reserve Funds Works currently funded through City Services Reserve Funds (L-legislative exemption; or C- City currently does not collect a DC for these, by policy) Storm Water collection and water management ponds (costs for large ponds in the $millions) Fire stations, equipment, outfitting costs Police facilities, equipment, outfitting costs Corporate Growth Studies growth studies with a City wide scope Library facilities, collections Parks & Recreation facilities, park development neighbourhood, district, sports fields, major open space, ESA s, parkway extension, Transit facilities, buses (L) Cultural or Entertainment Facilities, tourism facilities, acquisition of Land for Parks, provision of Hospitals, provision for waste management services, general administrative headquarters (L) 10% exemption for Soft Services (ie. noninfrastructure including Fire, Police, P&R, Library, Transit, Growth Studies) (C) generally services rarely included in DC bylaws including :Social Housing, Long Term Care Facilities, Public Works Maintenance Equipment (must be expected to last > 7 years to be eligible) The table above describes types of works that are excluded from rate calculations. In addition to the above, the City s DC rate policy also currently exempts the following types of development from rates (L- denotes legislative exemption; C- denotes exempted by City policy): Space added to an existing dwelling unit (L) Creation of one or two additional dwelling units in an existing single detached dwelling or one additional dwelling unit in any other existing residential building, provided that the total gross floor area of the additional unit(s) does not exceed that of the existing dwelling (L)

9 7 Parking building or structure(s) (C) Structure(s) intended for seasonal use only that do not have water and sanitary facilities (C) Commercial truck service establishment(s) (C) Temporary Garden Suite(s) installed in accordance with the provisions of the Planning Act, as amended (C) For development in relation to lands, buildings, or structures used for a place of worship or the purposes of a cemetery or burial ground or other non profit organizations exempt from taxation under the Assessment Act, there is 50% exemption from City Services Reserve Fund charges (C) Expansion of existing industrial buildings (L) New industrial buildings as defined in the by-law (C) Non-residential farm buildings which support agricultural uses (C) Residential unit development in defined areas of Downtown or Old East Village Areas (C) Certain lots in Cantebury Estates Subdivision and Gainsborough Meadows Subdivision, as these lots were subject to transition arrangements resulting from the 1993 annexation of lands from the Township of London to the City in 1993, all as defined in the by-law (C) Lands owned and used by the Corporation of the City of London including Library, Covent Garden Market, London Convention Center and London Transit (L) Lands owned by boards of education as defined in the Education Act (L) 2.4 Development Charge History and Urban Works Development charges have a history in London dating back to The first development charges in London had their origin in the City of London Act, This private legislation provided a mechanism for the City to recover the costs of improvements to boundary roads and outlet sewers. This system provided the funds needed to reimburse developers who constructed such urban works that served areas beyond their own developments. In 1991, with the advent of the Development Charges Act, 1989, the City continued with a charge for urban works (which provided for financing of growth related works built in conjunction with development), but also instituted a separate charge for Roads, and Sanitary Sewers. The latter charge was designed to recover a part of the growth related costs of works included in the City capital budgets. With annexation in 1993, the City again undertook a rate study which consolidated rates in the existing City, with those of the large predominantly rural areas. In 1997, a new act the Development Charges Act, 1997 required a further review of the rates. Development charge by-laws were approved under that legislation in 1999 and Amendments to the 2004 by-law have been made on a few occasions over the pas five (5) years. DC by-laws expire after five (5) years (in accordance with the legislation), and the impending expiry of the City s by-law (August, 2009) makes the completion of this study necessary.

10 Urban Works and the OMB In 1999, the City struck two separate development charge by-laws: one for the charges recovered for large scale growth related works built by the City of London another for the smaller scale works referred to as Urban Works However in an OMB decision rendered in February, 2002 (Mistretta appeal under the Development Charges Act, s. 22(1)), the presiding member stated:, the Board finds the relationship between the City s UW By-law, its DC By-law, and the Development Charges Act and its regulations to be curious. The Development Charges Act created a uniform set of principles to be followed and applied by municipalities throughout the Province, when imposing charges on development in order to obtain contributions towards the net capital costs that are related to growth. In concluding, The Board finds that the UW By-law is a form of Development Charge Bylaw, which brings with it the rights, restrictions and limitations established by the Development Charges Act and the regulations... In July, 2003, Council agreed to continue with the operation of the fund in its current form. The rates and policies with respect to Urban Works were continued with one major difference: what were formerly two by-laws were then combined into a single by-law Blue Ribbon Panel a new direction for funding of works from UWRF A Blue Ribbon Panel of development experts was commissioned by the City to address a growing concern over the financial health of the fund and to recommend changes to address these concerns. In, October, 2006 the Panel tabled a report on aspects of the City s development charge policy. Their recommendations addressed many general elements of the City s existing DC policy including affordability, accuracy of cost estimates, use of DC funds collected and fund governance. They also address specific elements of the UWRF funding approach. The panel recommendations that relate to financing development and the status of each recommendation are summarized below: Item Blue Ribbon Panel Recommendation Status 1) that the UWRF should continue to exist in a modified form with the intent that sufficient funds be available to pay for the works in a reasonable time period; 2) that minor growth related capital works be redefined so that more major works would become the responsibility of the City to fund under its annual Capital Budget approval process; This DC background study assumes continuation of UWRF with recovery of claimable costs generally over a 20 yr. period. This DC background study assigns responsibility for major works previously financed from UWRF to CSRF (projects funded by CSRF are subject to Council approval through annual budget process)

11 9 Item Blue Ribbon Panel Recommendation Status 3) that a new background study be undertaken for both the City Services and UWRF development charges by-laws; 4) that a new administrative structure be developed by the City to oversee the development of background studies for development charges, to administer the claims to the UWRF, to monitor the costs and charges being approved and to develop and administer front ending agreements arising from capital works for City Services; 5) that the City set up a program to monitor and review rates and costs to ensure that Development Charge rates are reflective of the true costs of the works and that unanticipated works and contingencies are properly taken into account in calculating the rates; 6) that the City review the UWRF and CSRF rate by-law where circumstances which would affect the rate (for example, significant deviations from the projects anticipated in the background study) arise in the future; 7) that the Development Charges Monitoring Committee be replaced by administrative review and quarterly reports to Board of Control and Council, and that an ongoing working relationship with the development industry be continued to discuss emerging issues and to develop revisions to development charges where required; 8) that the City consider issues of servicing costs and prematurity early on in the development process prior to proceeding to detailed studies and development conditions and that the issue of prematurity be considered by Council where there are significant servicing costs impacts on projects funded from City Services or Urban Works 9) that the City consider utilizing front ending agreements as a mechanism for the early emplacement of infrastructure defined by the City s capital budget and funded from City Services Reserve Fund; and Completion of this DC background study satisfies this recommendation New Development Approvals Business Unit being organized Monitoring program being recommended for initiation upon completion of DC rate setting process Monitoring program being recommended for initiation upon completion of DC rate setting process Reports will be directed to Board of Control; working relationship with Development Industry already established is enhanced through Development Approvals Business Unit (see item 4) above) Issues of prematurity will in future be addressed through Development Approvals Business Unit (see item 4) above) and through the Growth Management Implementation Strategy (Growth Management Implementation Strategy(GMIS)) Policy on Municipal Servicing Agreements under development (GM Vic Coté)

12 10 Item Blue Ribbon Panel Recommendation Status 10) that a detailed review be undertaken of the rules and claimable works allowed in the UWRF to limit the scope of works to site specific works with an oversizing component. This DC background study included a review of claimable works with a view towards limiting scope of same. A separate report entitled Blue Ribbon Panel (BRP) Implementation Strategy tabled March 1, 2007 reflected the above recommendations of the panel s report. The report assigned preliminary administrative responsibility for assessing and implementing various BRP recommendations. Implementation of the BRP recommendations was debated and discussed by a team (the UWRF/DC Implementation Team) consisting of the representatives of the London Development Institute (Steve Janes), the Urban League (Sandy Levin), the London District Building and Construction Trades Council (Jim MacKinnon) and senior City administration over the course of completion of this study Revisions to the Current UWRF Funding Approach One of the primary intentions of the DC background study process was to incorporate the recommendations of the Blue Ribbon Panel (BRP). As a result of the BRP study, the UWRF will continue to exist, but in a modified form. The following paragraphs discuss some of the key changes: A. New rules have been developed to redefine future claimable works. These generally : i. Reduce the number and scope of the works to be funded by the developer (through UWRF), redirecting responsibility for these to Council for approval through the annual budget process (funding through the CSRF). This shift in responsibility will be most evident in the funding of future road improvements that enhance the overall capacity of the road network and in the larger Storm Water Management Facilities. ii. In the case of pipes (sanitary & storm), future claims for works built (generally through greenfields) will be eligible for a subsidy for oversizing the works beyond a specific threshold diameter (sanitary 300mm; storm 1050mm). Below this diameter, the cost of the pipe is deemed to be local benefit, and is the responsibility of the proponent developer; In general therefore, the scope of the UWRF works has been decreased, as recommended in the Blue Ribbon Panel report. Council will be responsible for approving the timing of major works. B. Claims that are for completed works but are unpaid upon tabling of this background report are incorporated into the rate calculations at the unpaid amount. All UWRF claims will continue to be paid on the first-in-first-paid basis, as funds allow (same basis as currently exists). C. Claims that exist in executed agreements (executed prior to commencement date of the by-law) will continue to be administered under old rules.

13 Municipal Servicing and Financing Agreements (MSFA) Consistent with the recommendations of the Blue Ribbon Panel, the City will develop an approach to financing CSRF works that will, under certain conditions, allow a developer to accelerate the construction of the works, while at the same time, allowing the City to live within acceptable limits of debt and accelerated approvals of future capital works. This policy will involve the proponent developer and City entering an agreement (MSFA). In creating this policy, the City should consider the following: i. ability to afford the City share (ie. the non-growth share) of a project, given the current state of tax supported reserve funds and debt; ii. the existing level of development charge supported debt and cash flow expectations for the service to be accelerated; iii. minimal conditions and prerequisites the City will incorporate into its policy on MSFA iv. form of the agreement, and the process by which it is approved and entered. v. amounts to be financed on an interim basis by the proponent developer, and the terms of the financing, vi. criteria to determine whether a proposed acceleration of development in the area is desirable (e.g. takes advantage of spare capacity in other service areas, enhances market competition, meets City strategic objectives). vii. The work on the development of this policy continues at the time of completion of this study. 2.5 Methodology for Development Charge Rate Calculation This section briefly describes the various elements of the development charge legislation and how each has been addressed in this study Growth Forecasts The development charge legislation requires (under s.5 (1)1.) that The anticipated amount, type and location of development for which development charges can be imposed must be estimated. The work plan for this study therefore began with a projection of development activity (referred to as growth forecast ). These projections are necessary for prudent planning of municipal services and facilities. They represent the base assumption from which growth needs were projected. An initial growth forecast was completed for this study (completed by Clayton and Associates) in An update of the figures produced in the original 2006 forecast was completed in August, The figures in the 2007 update were then projected forward (by mathematical interpolation) to determine growth between 2008 and These figures were used as the basis for projecting growth needs and performing the ultimate rate calculations. This study projects that London will grow from a 2008 population of approximately 359,000 to 392,000 by 2018; and to 424,000 by A complete explanation of the growth forecast study methodology and its conclusions can be found in Appendix A.

14 Projecting Future Capital Needs Arising from Growth Forecasts Assumptions about the location of the anticipated growth were prerequisite to the next phase of the development charges study, that being the determination of municipal infrastructure and facility needs that result from the anticipated growth. The determination of municipal needs answers what infrastructure, facility and major equipment needs arise from growth in London?. This step is required under s.5 (1)2. of the Act. Capital needs resulting from growth projections were identified for soft service categories (ie. Fire, Police, Library, Transit, Parks & Recreation, Growth Studies) by the department, board or commission responsible for service delivery. The types of expenditures that are eligible for inclusion in the cost of capital needs are specified in s.5 (3) of the Act, being: 1. Costs to acquire land or an interest in land, including a leasehold interest. 2. Costs to improve land. 3. Costs to acquire, lease, construct or improve buildings and structures. 4. Costs to acquire, lease, construct or improve facilities including, i. rolling stock with an estimated useful life of seven years or more, ii. iii. furniture and equipment, other than computer equipment, and materials acquired for circulation, reference or information purposes by a library board as defined in the Public Libraries Act. 5. Costs to undertake studies in connection with any of the matters referred to in paragraphs 1 to Costs of the development charge background study required under section Interest on money borrowed to pay for costs described in paragraphs 1 to Local Services to be Installed or Paid for by Owner The Act recognizes that certain services may be required as a condition of development to be installed and paid for by the owner as a condition of approval under the Planning Act. This element of the legislation pertains to hard services with a local component. Accordingly, the local share of services is excluded from the development charge rate calculations. What constitutes the local share of services for the purpose of their exclusion from the development charge calculations was addressed in each of the background studies for infrastructure Council s Intention to Meet Growth Needs In order to be eligible for inclusion in development charge rate calculations, Council must indicate its intention to meet the growth related capital needs through an approved official plan, capital forecast, or similar expression of Council (s.5 (1)3. and related regulations). Most of the engineered hard service needs were identified through the City s Growth Management Implementation Strategy which preceded the completion of this background study. The GMIS was approved by Council in June, Further, the growth related works contemplated in the 2009 DC Study were correlated with the draft 2009 Capital Budget (with respect to timing and budget cost estimates), approved by Council in February, A recommendation for approval of the capital needs identified in this background study, subject to annual review in the Capital Budget approvals process, is contained in Chapter 4. A discussion of the projected needs for each service category is contained in each of Appendices B through N.

15 Legislated Adjustments to Arrive at Amount Eligible for Rate Calculations Before arriving at amounts eligible for inclusion in development charge rates, there are several adjustments that must be addressed: 1. any excess capacity in existing facilities must be taken into account in arriving at the amount of the capital needs used for development charge rate calculation purposes (s.5 (1)5.). Excess capacity is considered in planning all growth related works. Where there is excess capacity that Council has stated an intention would be paid for by new development, an exception exists. This exception pertains, for example, to oversized services 1 constructed in the past and which have been funded by debt. In this case, the existing debt on the works which benefits growth in the time horizon of this study is included in rate calculations. 2. the development charge rate calculation cannot include an increase in need which benefits existing development (s.5 (1)6.). The benefit to existing development is routinely referred to as the non-growth share. The assessment of benefit to existing development is unique to each projected capital need. 3. the rate calculation must exclude anticipated capital grants, subsidies or other contributions (s.5 (2)) subject to whether the person making it expressed a clear intention that all or part of the grant, subsidy or other contribution be used to benefit existing development or new development. Where applicable, these contributions have been identified and accounted for in the rate calculations. 4. for certain service categories namely Corporate Growth Studies, Library, Parks and Recreation, Transit, a 10% deduction from the costs otherwise determined to be eligible for inclusion in development charge rate calculations is mandated (s.5(1)8.). Where applicable, these deductions are identified, in the respective rate calculations. 5. In order to facilitate the calculation of separate residential and non-residential rates for each service, an allocation of the eligible costs to the various types of growth is made. This element of the rate calculation required judgment, and was addressed for each service category. 6. Finally, the rate calculations incorporated into this study incorporate an offset to the costs otherwise included in the rate calculations to recognize the amount of uncommitted reserve funds. These uncommitted reserve funds have been accumulated in the past, for projects that remain to be completed in the future, and are available to fund a portion of the growth needs identified in this study. They have therefore been deducted from the amounts to be collected from future growth. These are the key elements of the rate calculations as set out in the legislation. Each element has been addressed in arriving at the development charge rate eligible amount in the respective Appendices B through N Examination of Existing Levels of Service To ensure that municipalities do not improve their existing levels of service through capital improvements funded by developer contributions, the Act provides protection under (s.5 (1)4.). 1 The term oversized services refers to services which were designed to serve growth horizons beyond a defined growth horizon or geographic area. For example, the 1999 DC background study contained allocations of servicing costs, where those services were deemed to serve growth beyond 2021.

16 14 Section 5 (1)4 prohibits inclusion of infrastructure and facilities in rate calculations if their inclusion would improve municipal service standards above those that existed in the ten years preceding this background study. The regulations provide additional detail on this point. First, the regulations provide that where existing service standards are lower than those provided by another Act, the standard of service provided under the other Act prevails. This affects the design of most engineered infrastructure. In these cases, current design standards (rather than historical standards) are used to plan all future works. Secondly, the regulations specify that in measuring existing service levels, both the quantity and quality of those services should be taken into account. The City interprets quality to refer to the nature and grade of excellence of a service. Quantity refers to the number and size of the facilities used to provide services. By assessing the existing services with respect to these two characteristics, this study has arrived at an objective measure of existing service standards (where required). By using replacement costs to compute the existing standard (as required by regulation), a rational, objective comparison can be made between: the current cost estimate of planned future services and the current cost equivalent (considering quality and quantity) of existing services. Analysis of existing levels of service is included in the Appendix for each soft service Review of Long Term Capital and Operating Costs The Act also requires that the background study contain an examination, for each service to which the development charge by-law would relate, of the long term capital and operating costs for capital infrastructure required for the service (s.10(c)). This examination appears in Appendix O Calculation of Development Charge Rates The forecast of growth provides the basis for the growth needs calculation. The needs that result from the forecasted growth have been determined. The cost of each identified need was estimated, along with its expected timing. Through attention to the various exclusions required by the legislation (see above), an amount eligible for inclusion in the development charge rate calculation has been determined. Development charge rates are ultimately calculated by dividing: The development charge rate eligible capital needs by The growth forecast that gave rise to the capital needs. Key elements of the development charge rate setting process described in the preceding sections are depicted in Figure 2-1 below.

17 15 FIGURE 2-1 Illustration of Development Charge Rate Calculation Steps City of London Legislation 5 (1)1. The anticipated amount, type and location of development, for which development charges can be imposed, must be estimated. 5 (1)2. The increase in the need for service attributable to the anticipated development must be estimated for each service to which the development charge by-law would relate. 5 (1)4. The estimate under paragraph 2 must not include an increase that would result in the level of service exceeding the average level of that service provided in the municipality over the 10-year period immediately preceding the preparation of the background study required under section (1)3. The estimate under paragraph 2 may include an increase in need only if the council of the municipality has indicated that it intends to ensure that such an increase in need will be met. The determination as to whether a council has indicated such an intention may be governed by the regulations. Existing Service Standards assessed Expression of intention to meet need Regulations 3. For the purposes of paragraph 3 of subsection 5 (1) of the Act, the council of a municipality has indicated that it intends to ensure that an increase in the need for service will be met if the increase in service forms part of an official plan, capital forecast or similar expression of the intention of the council and the plan, forecast or similar expression of the intention of the council has been approved by the council. O. Reg. 82/98, s (1)5. The increase in the need for service attributable to the anticipated development must be reduced by the part of that increase that can be met using the municipality's excess capacity, other than excess capacity that the council of the municipality has indicated an intention would be paid for by new development. Regulations 5. For the purposes of paragraph 5 of subsection 5 (1) of the Act, excess capacity is uncommitted excess capacity unless, either before or at the time the excess capacity was created, the council of the municipality expressed a clear intention that the excess capacity would be paid for by development charges or other similar charges. O. Reg. 82/98, s. 5. Allocation of costs Residential growth population Allocation of costs Growth Process Background Studies project cost of services required to serve anticipated growth ("increased need") Allocation of costs Non-Residential growth Allocation of costs Non-Growth Estimate population and nonresidential space to be served Growth Forecast For soft services measure existing service standards complete Master Planning studies based on growth projections (including gross cost of service needs) incorporate existing fund obligations, other anticipated funding contributions Consider existing capacity in facilities? consider amount of area which benefits from the works, and which requires remedial works consider whether area has contributed to development charges for this component Consider whether future growth benefits from the works 5 (1)6. The increase in the need for service must be reduced by the extent to which an increase in service to meet the increased need would benefit existing development.

18 FIGURE 2-1 Illustration of Development Charge Rate Calculation Steps (continued) 16

19 Public Review Process and Stakeholder Consultation The public review process provides the opportunity for interested parties to make representations on the proposed by-law. The legislation prescribes: o that Council conduct a public meeting o that at least 20 days notice of the meeting be provided o that the background study and proposed by-law be made available at least two weeks prior to the meeting, and o that any person who attends the public meeting be allowed to make representations concerning the proposed by-law The City of London also undertook, at the outset of the process to include various stakeholder groups. The group collectively was referred to as the Urban Works Reserve Fund/DC Implementation Team. Constituted by Council in March, 2007, the group was comprised of the following representatives: Development Industry: London Development Institute (Steve Janes) Property Taxpayer: Urban League (Sandy Levin) Construction Trades: London District Building and Construction Trades Council (Jim MacKinnon) The group met regularly beginning in March, 2007 and on at least a dozen occasions since, for the purpose of discussing and compiling the background studies and this consolidating work. Numerous further meetings were conducted between representatives of City s Engineering Department and either the London Development Institute or Urban League, to discuss various elements including new rules associated with the claimable works funded through the Urban Works Reserve Fund, project cost estimates, deductions applicable to arrive at amounts eligible for rate calculations. Council also received reports on: i. the Growth Management Implementation Strategy (June, 2008), ii. a report on implementation of new approaches to cost sharing incorporated into the calculation of Transportation rates and on Commercial Rate Policy in general, iii. a report on policy options with respect to implementation of Industrial Development charges, and definitions that distinguish Commercial, Institutional and Industrial Development, and iv. a report on the policy options with respect to exemption of downtown residential development. Terms of reference for both the UWRF/DC Implementation Team are contained in Appendix O. Figure 2-2 depicts the reporting roles and relationships.

20 FIGURE 2-2 REPORTING ROLES AND RELATIONSHIPS 18

21 19 3 Chapter 3 - Calculation of the Development Charge Rate This chapter discusses various aspects of the City s development charge rate policy. 3.1 Area wide versus specific area rate The Development Charges Act provides flexibility to recover growth costs through rates levied equally across the entire municipality, or only part of it. The City of London has historically, and continues currently,: 1. to assess development charges essentially on a city-wide basis (with certain exceptions noted below); 2. to exempt development which occurs outside the Urban Growth area 2, from charges for water, sanitary & storm sewers, storm water management facilities and minor road works (ie. urban services) while collecting for all other services; 3. where residential development occurs within defined areas of downtown London, to exempt that development from payment of development charges. The charges exempted in these areas are instead funded through property tax support. (See discussion below under Downtown Residential Exemption. In October, 2003, a report that addressed the policy decision regarding area rating was tabled at the Board of Control. The report indicated that though there may be certain advantages to pursuing an even more refined area rate policy (that distinguishes charges not only within or outside the UGB, but also on an area by area basis), there were also significant disadvantages to such a policy. The report made no recommendation to change the existing policy. This development charge study remains consistent with existing City policy which computes rates on an area wide basis and recommends only separate rates for areas outside of the UGB. Calculation of area rates requires separation of growth costs and growth forecasts for each area and each service to be area rated. The decision to area rate should be made at the outset of the process in order to provide the necessary information. 3.2 Industrial Development Exempt The Development Charges Act contains an exemption from development charges for certain qualifying types of industrial exemption. This exemption applies to enlargements of existing industrial space, and exempts 100% of the enlargement, where the enlargement is less than 50% of the existing floor space. Enlargements beyond 50% are not statutorily exempt, but may be subject to development charges on a proportionate basis. Industrial development (both enlargements and new development) in London has long been completely exempted from the payment of development charges. In November, 2008, a report that reviewed this policy issue was tabled. As a consequence of the report, Council determined that the existing policy of exempting this form of development should continue. Through the same report, the definition of all non-residential development types 2 The Urban Growth boundary (identified in the City s Official Plan) is an area within which the City will entertain development of an urban nature.

22 20 has been expanded and amended (see further discussion on Changes to Non-Residential Development Definitions ). In this study, an Industrial development charge has been computed, but the Development charge by-law will reflect an exemption to this form of development, consistent with the Council s decision on this matter (December 2, 2008). 3.3 Planning period The service needs of the City have been planned on varying time horizons. The Development Charges Act limits, for the purpose of development charge rate calculations, the planning period of certain services to ten (10) years (see s. 5(1)4.). Consistent with this provision, the planning period for Fire, Police, Library, Parks and Recreation, Transit, and Corporate Growth Studies is limited to ten (10) years. The planning horizon for other services (Roads, Water, Sanitary, Storm Sewers,) are not similarly limited and have been planned over a 20 year time horizon. The planning horizon employed for each service is cited in the individual Appendix in which the DC rate calculations for that service are discussed. The key in creating a proper charge is not in how long the growth forecast period is. Rather, the key is that the growth needs identified are a consequence of the growth forecast for the period selected, and properly reflect benefits for that population growth. 3.4 Services not covered There are certain services that are statutorily ineligible under the Development Charges Act. These include charges for cultural or entertainment facilities, tourism facilities, land for parks (but not a reasonable amount of land needed to support recreational facilities), hospitals, waste management services, and headquarters for general administration of the municipality. Of the services which remain, there have been no development charge rates calculated for Public Works Vehicles (all vehicles expected to last 7 years or less are ineligible in any event), Social Housing (see DC covering report for discussion of this topic), Long term care facilities and golf courses. These services are, for various reasons, rarely incorporated into municipal development charge rate structures. 3.5 Exemptions & Discounts from Development Charge Rates Exemptions and discounts from development charges apply to various types of development. The Development Charges Act exempts: land owned and used by a municipality or school board. o In this regard, the City s DC by-law definition of municipal has been clarified to include the London Public Library Board, The Covent Garden Market Corporation, The London Convention Center Corporation, The London Transit Commission Industrial additions of up to 50% of existing floor area of building. Where the addition exceeds 50% of the floor area, the portion in excess of 50% may be subjected to development charges. New stand alone industrial developments are

23 21 not exempted by statute but are presently exempted by City of London policy(see discussion under Industrial Exemption above) Residential development that results only in the enlargement of an existing dwelling unit, or that results in the creation of up to two additional units Municipal and School Board contributions to Urban Works funds With respect to the first exemption listed in the bulleted list in the preceding paragraph, the City (and its boards) have in the past contributed to Urban Works funds on development that they initiated (ie. new libraries, arenas, Western Fair, etc.) in community growth areas. This practice remains unchanged in the draft by-law that will be placed before Council Non-statutory exemptions In addition to the statutory exemptions mentioned above, the City s policy also exempts: 1. redevelopment, where a building was demolished (see discussion under Demolition Credits below) 2. residential development in defined areas of the Downtown and Old East Village areas (see further discussion below under Downtown Residential Exemption). 3. The City s existing policy previously provided for a complete exemption for all nonresidential development for soft services charges (Fire, Police, Corporate Growth Studies, Library, Parks & Recreation, Transit. This is recommended for change). (See further discussion below under Non-residential exemption from soft service Charges). 4. The City s policy provides for the statutory exemption for additions to Industrial building developments (discussed under 'Exemptions & Discounts from Development Charge Rates and Industrial Development Exempt above). 5. The City s policy provides a 50% discount for certain types of institutional development generally defined as hospitals, universities, colleges, churches and not-for-profit establishments. This exemption is also discussed below (see Institutional Discount). 6. The City s policy exempts certain specified developments. (Refer to discussion under Other Specific Exemptions). 7. The City differentiates charges in the urban area from its Rural Area Charges (see discussion on this topic below). 8. Finally, with respect to Water Supply, the City exempts this service from inclusion in the development charge, as it funded out of water user rate charges and is recommended to continue to do so. The covering report that is tabled with this study contains further discussion on this topic. In computing a development charge, the recovery of costs attributed to certain exempt forms of development from other non-exempt forms is prohibited (s.5 (6)3). The costs of exemptions and discounts is reflected in the City s capital budgets through reduced draws from reserve funds for funding growth related works. The various DC exemptions and discounts are explored in greater detail below Demolition Credit Where a building previously existed on a site, it is traditionally considered to have paid for municipal services and is not liable for payment of the same services upon redevelopment. This logic basically establishes a reservation of capacity for all buildings that have been or

24 22 will in future be demolished. The requirement to extend demolition credits in London is also subject to the following considerations: i. There is a requirement of the Development Charges Act that dictates that, in computing a development charge, the municipality must take into account any excess system capacity before calculating its capital needs arising from development. The reserved capacity mentioned above is in affect, absorbed by this opposing requirement. Effectively, there is no reserved capacity available to properties that involve demolished buildings because the legislation requires that the excess capacity be taken into account in identifying increased service needs resulting from growth. Should the City be compelled to provide Demolition Credits for an unlimited period, it would also be prudent for it to provide reserve capacity for such developments when it identifies its growth related capital needs. ii. It may be true that there are no water lines, sanitary sewer pipes or perhaps storm sewer pipes that need to be built to serve a redeveloped site but the development charge does not incorporate costs that have been funded in the past, but only those required in the future. The redevelopment may not trigger a need for new pipes, but does contribute to the need for sanitary treatment and water supply capacity, road expansions, recreation facilities, libraries, fire suppression and policing (to name a few). That is, development on these sites will generally contribute to an increased need for virtually every service. iii. Until 1999, the City provided a demolition credit where lawful demolition of the existing building was completed within the preceding five years to permit a new building. Through an appeal of the 1999 by-law, the City was directed, by OMB decision, to provide a demolition credit where lawful demolition of the building occurred any time between April 6, 1973 and the expiry date of the by-law. This meant that any lawful demolition occurring in the last 30 years would earn a demolition credit. This was an onerous and unusual step. In reviewing its policy in 2004, the City reverted to a standard ten year life for demolition credits and twenty year life, for developments in designated areas of the Downtown. The demolition credit policy was reviewed again in 2009 (see 2009 DC covering report) with the conclusion that the existing policy should continue Downtown Residential Exemption In the mid-1990 s the City, addressing a decline in the downtown core, created and implemented a policy to encourage downtown residential development. The policy exempts the creation of development in defined geographic areas of the core (see Maps 3-1 and 3-2 which follow). The City has funded this policy from property taxes through the Downtown/Centertown Reserve Fund. The program has proven successful and has been cited as a major contributing factor in rejuvenating the downtown core. The policy was reviewed in a separate report to Board of Control (November 26, 2008). The report recommendation was to begin to phase out the program. Notwithstanding the recommendation, Council (on December 2, 2008) decided to extent the program for the time being. Map 3-1 and 3-2 on the following pages illustrate the specifically exempted downtown areas from the residential charge.

25 QUEENS AVE TALBOT ST RIDOUT ST N RIDOUT ST S RICHMOND ST CLARENCE ST CLARENCE ST WATERLOO ST WATERLOO ST CARTWRIGHT ST 23 MAP 3-1 DOWNTOWN RESIDENTIAL EXEMPTION EMPRESS AVE ANN ST DOWNTOWN RESIDENTIAL DC EXEMPTION AREA MILL ST ST GEORGE ST PALL MALL ST KENNETH AVE YALE ST REGINA ST BLACKFRIARS ST WILSON AVE CHERRY ST CUMMINGS AVE NAPIER ST BARTON ST JOHN ST CENTRAL AVE ALBERT ST HYMAN ST WOLFE ST WAVERLEY PL HOPE ST KENT ST CARTWRIGHT ST KENT ST PRINCESS AVE DUFFERIN AVE FULLARTON ST PICTON ST CARLING ST DUNDAS ST KING ST BURWELL ST THAMES ST HORTON ST E YORK ST BATHURST ST WELLINGTON ST BURWELL ST S SIMCOE ST INGLESIDE PL GREY ST WORTLEY RD CRAIG ST BRUCE ST ARDAVEN PL CARFRAE ST HILL ST SOUTH ST COLBORNE ST.

26 MAP 3-2 OLD EAST RESIDENTIAL EXEMPTION 24

27 Institutional Discount In addition to the statutory exemption of schools and municipal facilities (discussed earlier under the headings Statutory Exemptions and Municipal and School Board contributions to Urban Works funds ), the City s policy also provides a 50% discount for certain types of institutional development generally defined as hospitals, universities, colleges, churches and not-for-profit establishments. The practice in London has been to not extend this exemption to Urban Works reserve funded services, where the full charges are paid for these services, notwithstanding the 50% discount for services financed from the City Services Reserve Fund (CSRF). No changes are recommended to the present policy regarding Institutional discounts Non-residential Exemption from soft service Charges Change Recommended In adopting the 1999 & 2004 Development Charge by-laws, the City adopted a policy of exempting all non-residential development from the soft service charges (Fire, Police, Corporate Growth studies, Library, Parks & Recreation, and Transit). A relatively small portion of the total growth costs for these services is attributed to nonresidential growth (varies between 5 & 25%). The previous rationale for the exemption is that non-residential development generally benefits little from these services. This perception was reviewed in It was noted that some of the growth costs assessed against non-residential growth, received at best, a very remote benefit. These services were Parks & Recreation and Library. Accordingly, the growth costs for these two services have been reallocated entirely to the benefit of the residential growth population (formerly 5% of these growth costs were allocated to non-residential). At the same time, the remaining soft services (Fire, Police, Transit, and Corporate Growth Studies) do provide a legitimate growth benefit to non-residential development. Administration is recommending that the relatively minor share of growth costs assessed against non-residential growth for these services be recovered from this form of development. The overall reduction in the rates for non-residential will allow for the formerly exempted soft services to be absorbed in the rate, with minor effect on the non-residential rate. The principle of allocation of the charge against the benefiting form of development, and recovery of growth costs from development, are at the root of these changes. The above policy amendments are consistent with municipal development charge practice across the province (see further discussion of this topic in the 2009 DC covering report) Other Specific Exemptions The City s policy on development charges exempts the following: 1. a parking building or structure 2. a bona-fide non-residential farm building 3. a structure intended for seasonal use. 4. a commercial truck service establishment. 5. floor space below grade

28 26 With respect to item 5, administration recommends that the definition of floor space below grade be amended to make it more consistent with the definition used in the Ontario Building Code. Otherwise, it is suggested that the exemptions identified in items 1. to 5. above be continued unchanged for the present. A further exemption has been added to the list in the form of air supported sports domes. Similar temporary buildings are also recommended for exemption (eg. buildings with a skin covering a temporary skeletal structure). These exemptions are further qualified in that the owner must be a non-profit organization Rural Area Charges Charges outside the Urban Growth Boundary as defined in the Official Plan are lower than those that exist for charges applied within that boundary. The applicable charge for a residence outside the Urban Growth Boundary (UGB) in the recent past has been approximately ⅓ of the charge inside the area (in 2009, the charge was $5,766 vs. $17,005 overall Residential rate inside UGB). This rural; charge will increase dramatically this year (calculated at $11,478 per unit), largely due to the increase in the Transportation rate. The basis for the charge is that all development is considered to benefit from increased capacity in the Road system (which accounts for over 80% of the charge) as well as soft service expansion (Fire, Police, etc.). The current distinctions between rates within the Urban Growth Boundary (UGB), and outside the UGB are proposed to continue as at present. 3.6 Intention Not to Introduce Credits Into the System The Development Charges Act, 1997 provides for the potential for a municipality to provide credits for work performed relating to a service to which the development charge by-law relates. Under the City s approach to financing growth services, work completed by a developer is either eligible for payment of a claim (according to the policies which govern the UWRF) or are eligible for payment under the terms of a specific agreement for construction of services. A system of credits that reimburses developers for work they complete would compete with the existing system of payments under the UWRF, and is not recommended. 3.7 Potential Rate Phase-in This development charge study is being tabled at a time when economic conditions affecting the real estate building market have changed dramatically within the past six months. In these circumstances, it may be difficult for the industry to absorb increases in rates. The following factors bear on this situation: 1) Despite the current downturn, it remains the expectation of Administration that the long term growth projections will be achieved. 2) The current slowdown in activity in the building industry will have the effect of depressing revenues to the DC fund in the immediate term, but expectations are for a recovery after 2 or 3 years.

29 27 3) Any phase-in of rates (ie. implementation of rate increases on a less than immediate basis) has two conflicting impacts : a) it reduces the total amount of revenue that could be collected through an immediate implementation (however, because of 2) above, this may not be as significant as in healthy economic times); b) it provides for a smoother transition for those affected by the rate increase in transitioning their business cost structure to the new rate. These implications must be weighed in arriving at the decision to phase-in (as opposed to immediately implement) rate increases. One thing is clear however - that growth costs do not disappear, and are not expected to decline in the long term. Growth costs that are not recovered from growth must be recovered from some other source. The rates computed in this study represent rates collectable under the Act. The covering report includes some additional discussion on the effect of a potential phase-in of rate increases. It is ultimately Council s decision as to whether it wishes to discount any of the rates. 3.8 Reserve Funds A separate fund is maintained for each of the service components listed in the City s DC rate structure. For Urban Works on those same tables, contributions for Storm Water Management are accumulated in one fund, with contributions towards all other services in another. This is consistent with the existing set of development charge reserve funds. A new City Service reserve fund is being established to finance the cost of major SWM works (responds to one of the Blue Ribbon Panel recommendations that the City undertake funding of major infrastructure). 3.9 Indexing Rates The development charge by-law provides for indexing of the charge on an annual basis to recognize changes in price levels. The indexing is completed using a prescribed index (Statistics Canada Quarterly, Construction Price Index, catalogue number ). Since costs have been estimated in 2009 dollars, rates should be indexed from that point forward. Since the index with the intent of ensuring that DC rates keep pace with municipal servicing costs, it is important that the index used be one that most closely matches those costs. For this reason, it is recommended that the Non-residential index be used to adjust all DC rates in the future Effective Date of By-law The new by-law is scheduled to take effect on August 4, 2009, being coincident with the expiration of the existing by-law. Amendments to development charge rates being tabled with this study (except for indexing and possible rate phase-in) must be justified in a background study which must be completed within one year of a proposed amending by-law (DC Act, s. 11). The new by-law may be in effect for up to 5 years.

30 Monitoring Program An enhanced monitoring program will be initiated following the passage of the new by-law. This program should increase the City s knowledge of how revenues from the fund measure up against those predicted by the growth forecasts. It should also provide observations of how actual costs compare with those incorporated into the rate calculations. These two improvements of the City s current system will assist in further improving the DC rate calculation methods employed in the future, and help ensure that rates are an accurate reflection of growth costs Date Charges Collection Development charges shall be payable at the time of issuance of a building permit consistent with current practice Changes to Non-Residential Development Definitions A report on Industrial Development Charge Policy in November 26, 2008 explained certain difficulties with the existing definition of Industrial, and lack of definitions for Commercial and Institutional development, were creating. The new definitions were derived in part, from a review of similar definitions in several other southwestern Ontario municipalities. Accordingly, these definitions have been either created or expanded in this version of the by-law, all in accordance with Council s approval of the expanded definitions in December, 2008.

31 Summary Development Charge Rate Calculations Growth Forecast Chapter 2 provided a summary of the legislative requirements and the general approach to calculation of development charge rates. The process began with an approximation of future growth. The growth forecasts over time periods (2006 & beyond) were prepared by Clayton & Associates. These forecasts were adapted to fit the time period for this Development Charge Background Study (2008 & beyond). These adapted forecasts formed the basis of projecting service needs for municipal services with identifiable growth related impacts. The approach used to determine growth forecasts is detailed in Appendix A Identification of Growth Related Needs Service needs were projected in two major categories: 1. Major City Services these are capital works needed to facilitate growth, or respond to new demands for growth services and include Road expansion and upgrade, Sanitary Sewer Trunk Works and Treatment facilities, Water Supply and Distribution, major Storm Water Management facilities, Fire, Police, Corporate Growth Studies, Library, Parks and Recreation and Transit. 2. Minor Urban Works these are capital works generally required as conditions of development, needed to facilitate growth in various urbanizing areas of the City and include Minor Roadworks, claimable Sanitary Sewer pipe works, claimable Storm Pipe and Storm Water Management Facilities. The details of the capital needs are discussed in Appendices B through N of this study. In all cases, the capital needs resulted from a concentrated review of the needs arising from growth, either through internal planning or with the assistance of an external consultant Net Capital Costs Eligible for Development Charge Rate Calculations The appendices also contain discussions of the source of gross capital costs, and deductions applied to arrive at net costs eligible for Development Charge rate calculations. Finally, attribution of the net growth related costs to benefiting types of growth were made. The resulting figures are used in the calculation of rates (excluding financing costs) for each type of benefiting growth. These rates are referred to as the pre-financing cost rates Final Adjustments Prior to Rate Calculations There are final adjustments to the rate calculations that take into account existing Reserve Fund balances, financing costs associated with the anticipated cash flows in the fund, and expected recovery from future growth. These calculations are not necessary with respect to Urban Works as the financing costs associated with these costs are borne by the initiating developer.

32 Tables Summarizing Rate Calculations The tables which follow at the end of this chapter summarize the detailed service-byservice calculations for each of the benefiting types of development. These tables summarize the information contained in each of the Appendices B through N. Table 3-1 reflects summary information on each service component including: The estimated gross costs of the growth related capital expenditures The statutory deductions needed to arrive at the amount eligible for DC rate calculations including grants and other contributions, non-growth share, post period benefit and where applicable, the 10% statutory deduction for soft services. The net amount eligible for the DC rate calculations, and the average percentage allocation of the net amount, to benefiting types of growth (Res/ICI splits). Table 3-2 relates solely to Residential DC rate calculations. It shows the effect of existing reserve funds on the net amount eligible for DC rate calculations for each service. The right hand columns show both the DC rate before and after inclusion on finance costs (the latter determined through a cash flow analysis. The total rate recommended from this study for a single family unit amounts to $22,921 per single family unit. This rate excludes the Water Supply rate as Administration recommends continued exemption of this component from DC rates. The charges for other types of residential development are reduced, based on density assumptions used for each unit type in the growth forecasts. Table 3-3 summarizes DC rate calculations for Non-Residential developments (also excluding Water Supply component). In this case, the rate reported includes financing costs determined through a cash flow analysis. The total calculated rates for nonresidential development (excluding Water Supply rates) amount to: Commercial $ / sq. m. Institutional $ /sq.m. Industrial $ /sq. m. The rates identified all include financing costs, where applicable. It should be noted that since developers carry the financing costs associated with Urban Works (UW), there is no provision for financing costs incorporated in the UW rates Timing of Expenditures The regulations to the Development Charges Act require that the study reflect the total of the estimated capital costs that may be incurred during the life of the by-law. Table 3-4 meets that requirement. It provides a summary level look at the timing of all the capital expenditures which are reflected in Appendices B through N, as well as the allocation of the costs that benefit existing and new development within the anticipated term (5 years) of the by-law. Table 3-4 indicates that in the five years following passage of the by- law, capital costs benefiting both growth and non-growth, in the amount of approximately $585 million are projected to be incurred. Approximately $411 million of this amount might be expected to be incurred through City Capital budgets (including consolidated boards and commissions) in the next 5 years. The remainder is either continuation of payment of debt for previous growth expenditures intended for recovery from DC s ($7M), Urban Works expenditures

33 31 largely under the timing control of the proponent developer ($65M), or expenditures by the Joint Water Boards related to supply capacity ($101M) Administration of By-law The administration of the by-law is assigned in part to the Director of Building Controls, and in part to the City Treasurer (safekeeping of Reserve Funds, etc.), consistent with current practice Fund Reporting and Monitoring There is an annual report on the activity in the Development Charges Reserve Funds required under the statute, to be filed with the Minister of Municipal Affairs. Under a new Development Approvals Business Unit, City Administration intends to review the monitoring and reporting of fund activities to determine appropriate changes to periodic reporting of fund activities and all matters related to development charge rate setting (see earlier section on Fund Monitoring).

34 32 TABLE 3-1 Overall Capital Needs and DC Adjustments Summary Table SERVICE SERVICE COMPONENT COMPONENT Detail Total Estimated Estimated Cost Less: future capital grants, subsidies subsidies or other contributions contributions anticipated anticipated Less: Portion of Gross Project Cost Funded In Prior Years Subtotal Subtotal Less: Future growth benefits (portion (portion of growth costs attributable attributable to growth expected expected to occur beyond planning planning horizon for this service) service) Subtotal Subtotal Subtotal Commercial Institutional Industrial % benefit % $ % $ % $ % $ Non-growth Non-growth share Less: 10% statutory statutory deduction deduction (if applicable) applicable) Less: Amount ineligible for rate calculation - improvement over existing standard (see Supplement A if applicable) Net Amount Eligible for DC rate calculation RESIDENTIAL NON - RESIDENTIAL FIRE Facilities $5,870.0 $.0 $450.0 $5, % $2,067.5 $3, % $989.5 $.0 $2,363.0 $.0 $2, % $1, % $ % $ % $47.3 Vehicles $1,295.0 $.0 $.0 $1, % $470.5 $ % $251.9 $.0 $572.7 $.0 $ % $ % $ % $ % $11.5 Outfitting $92.0 $.0 $.0 $ % $33.2 $ % $18.5 $.0 $40.3 $.0 $ % $ % $ % $ % $.8 Subtotal $7,257.0 $.0 $450.0 $6, % $2,571.1 $4, % $1,259.9 $.0 $2,976.0 $.0 $2,976.0 $2,321.3 $357.1 $238.1 $59.5 POLICE Facilities $7,290.0 $.0 $.0 $7, % $2,405.7 $4, % $.0 $.0 $4,884.3 $873.1 $4, % $4, % $.0 0.0% $.0 0.0% $.0 Vehicles $27.0 $.0 $.0 $ % $.0 $ % $.0 $.0 $27.0 $.0 $ % $ % $ % $ % $.5 Outfitting $223.5 $.0 $.0 $ % $.0 $ % $.0 $.0 $223.5 $.0 $ % $ % $ % $ % $4.5 Subtotal $7,540.4 $.0 $.0 $7, % $2,405.7 $5, % $.0 $.0 $5,134.7 $873.1 $4,261.6 $4,206.5 $30.0 $20.0 $5.0 CORPORATE Growth Studies $10,187.0 $.0 $.0 $10, % $2,042.5 $8, % $3,044.5 $103.8 $4,996.3 $.0 $4, % $3, % $ % $ % $234.3 Subtotal $10,187.0 $.0 $.0 $10, % $2,042.5 $8, % $3,044.5 $103.8 $4,996.3 $.0 $4,996.3 $3,966.6 $574.9 $220.4 $234.3 LIBRARY Facilities $9,540.0 $.0 $750.0 $8, % $3,670.3 $5, % $915.2 $420.4 $3,784.0 $.0 $3, % $3, % $.0 0.0% $.0 0.0% $.0 Collections $710.0 $.0 $.0 $ % $.0 $ % $.0 $71.0 $639.0 $.0 $ % $ % $.0 0.0% $.0 0.0% $.0 Subtotal $10,250.0 $.0 $750.0 $9, % $3,670.3 $5, % $915.2 $491.4 $4,423.0 $.0 $4,423.0 $4,423.0 $.0 $.0 $.0 PARKS & REC. Facilities $110,560.1 $.0 $16,205.0 $94, % $20,946.4 $73, % $46,053.4 $2,447.6 $24,907.7 $4,766.0 $20, % $20, % $.0 0.0% $.0 0.0% $.0 Parkland Dev. $32,115.0 $.0 $180.0 $31, % $10,358.8 $21, % $5,349.3 $1,622.7 $14,604.2 $5,515.6 $9, % $9, % $.0 0.0% $.0 0.0% $.0 Subtotal $142,675.1 $.0 $16,385.0 $126, % $31,305.2 $94, % $51,402.7 $4,070.3 $39,511.9 $10,281.5 $29, % $29, % $.0 0.0% $.0 0.0% $.0 TRANSIT Facilities $22,000.0 $19,500.0 $.0 $2, % $1,325.0 $1, % $752.0 $42.3 $380.7 $.0 $ % $ % $ % $ % $41.8 Vehicles $8,676.8 $.0 $.0 $8, % $.0 $8, % $.0 $867.7 $7,809.1 $.0 $7, % $5, % $ % $ % $858.0 Subtotal $30,676.8 $19,500.0 $.0 $11, % $1,325.0 $9, % $752.0 $910.0 $8,189.8 $.0 $8,189.8 $5,882.8 $1,007.3 $399.9 $899.8 SOFT SERVICE TOTAL $208,586.3 $19,500.0 $17,585.0 $171, % $43,319.8 $128, % $57,374.3 $5,575.5 $65,231.7 $11,154.6 $54, % $50, % $1, % $ % $1,198.7 SAN. SEWER PCP & Other Fac. $161,587.2 $.0 $.0 $161, % $57,910.0 $103, % $25,382.1 $.0 $78,295.1 $.0 $78, % $56, % $5, % $4, % $11,730.7 Sewer Trunks $60,489.4 $.0 $.0 $60, % $.0 $60, % $8,839.4 $.0 $51,650.0 $.0 $51, % $47, % $1, % $ % $3,231.8 Minor San Sewer $34,209.6 $14,650.0 $.0 $19, % $.0 $19, % $291.5 $.0 $19,268.2 $19, % $17, % $1, % $ % $76.9 Subtotal $256,286.2 $14,650.0 $.0 $241,636.2 $.0 $57,910.0 $183,726.2 $.0 $34,513.0 $.0 $149,213.2 $.0 $149,213.2 $121,415.8 $7,803.8 $4,954.3 $15,039.3 WATER Distribution $117,934.9 $6,800.0 $49,077.0 $62, % $5,146.0 $56, % $12,053.9 $.0 $44,858.0 $.0 $44, % $30, % $1, % $1, % $11,430.2 Supply $162,213.4 $46,141.5 $.0 $116, % $21,462.6 $94, % $53,974.0 $.0 $40,635.3 $.0 $40, % $17, % $2, % $1, % $19,291.1 Subtotal $280,148.3 $52,941.5 $49,077.0 $178, % $26,608.6 $151, % $66,027.9 $.0 $85,493.3 $.0 $85, % $48, % $4, % $2, % $30,721.3 STORM Sewer Servicing $9,090.7 $4,808.1 $.0 $4, % $.0 $4, % $.0 $.0 $4,282.7 $.0 $4, % $2, % $ % $ % $1,062.7 SWM Facilities $170,139.0 $.0 $.0 $170, % $22,280.0 $147, % $24,694.6 $.0 $123,164.4 $.0 $123, % $89, % $13, % $6, % $14,434.4 Minor Storm $47,921.8 $31,622.8 $.0 $16, % $.0 $16, % $.0 $.0 $16,299.0 $.0 $16, % $13, % $1, % $ % $.0 Minor SWM $46,547.7 $.0 $.0 $46, % $1,945.0 $44, % $.0 $.0 $44,602.7 $.0 $44, % $36, % $5, % $2, % $.0 Subtotal $273,699.2 $36,430.8 $.0 $237, % $24,225.0 $213, % $24,694.6 $.0 $188,348.7 $.0 $188, % $141, % $20, % $10, % $15,497.0 ROADS Major Roadworks $655,511.8 $.0 $10,214.0 $645, % $165,727.4 $479, % $44,431.8 $.0 $435,138.5 $.0 $435, % $322, % $47, % $21, % $43,513.9 Minor Roadworks $55,427.0 $.0 $.0 $55, % $.0 $55, % $.0 $.0 $55,427.0 $.0 $55, % $41, % $6, % $2, % $5,542.7 Subtotal $710,938.8 $.0 $10,214.0 $700, % $165,727.4 $534, % $44,431.8 $.0 $490,565.5 $.0 $490, % $363, % $53, % $24, % $49,056.6 HARD SERVICE TOTAL $1,521,072.5 $104,022.3 $59,291.0 $1,357,759.2 $.0 $274,471.0 $1,083,288.2 $.0 $169,667.3 $.0 $913,620.8 $.0 $913, % $674, % $87, % $41, % $110,314.2 GRAND TOTAL $1,729,658.7 $123,522.3 $76,876.0 $1,529, % $317,790.8 $1,211, % $227,041.6 $5,575.5 $978,852.5 $11,154.6 $967, % $724, % $89, % $42, % $111,512.9

35 33 TABLE 3-2 Residential DC Rate Calculations Summary City Services and Urban Works Combined Summary of Development Charge Rates Residential PRE-FINANCE DC RATE CHARGE PER UNIT (EXCLUDING OPENING FUND BALANCE AND FINANCING CHARGES) FINAL CALCULATED DC RATE CHARGE PER UNIT TAKING INTO ACCOUNT OPENING FUND BALANCE AND FINANCING CHARGES Service Sub-Component Residential Amount Eligible For DC Rate Calculation Portion Of Works Collected In Prior Years(uncommitte d reserve funds) Total Residential Net Cost Eligible For DC Rate Calculation Purposes (in, 000's) Allocation on Gross (%) Allocation on Net (%) Gross Population Per Capita Density Factor Single & Semi- Detached (Prefinance costs) Single & Semi- Detached (includes finance costs) Multiple Unit Apartment <2 (includes bdrm (includes finance costs) finance costs) Apartment 2 bdrm (includes finance costs) $11.16 per capita FIRE Facilities $1,843.2 $1,335.3 $ % 49.4% 55,539 $ $ Vehicles $446.7 $421.2 $ % 16.8% 55,539 $ $ 1.47 Outfitting $31.4 $42.5 $ % 55,539 $ $ - Subtotal $2,321.3 $1,799.0 $533.4 $ 9.60 $ $36 $26 $15 $21 $40.98 per capita POLICE Facilities $4,011.2 $1,709.7 $2, % 100.0% 55,539 $ $ Vehicles $21.0 $.0 $ % 78.0% 55,539 $ $ 1.22 Outfitting $174.3 $121.3 $ % 51.9% 55,539 $ $ 3.06 Subtotal $4,206.5 $1,831.0 $2,375.5 $ $ $132 $94 $56 $79 $78.91 per capita CORPORATE SERVICES Growth Studies $3,966.6 $33.0 $3, % 79.3% 55,539 $ $ Subtotal $3,966.6 $33.0 $3,933.6 $ $ $253 $181 $108 $152 $10.69 per capita LIBRARY Facilities $3,784.0 $3,522.2 $ % 100.0% 55,539 $ $ Collections $639.0 $249.8 $ % 100.0% 55,539 $ $ Subtotal $4,423.0 $3,772.0 $651.0 $ $ $34 $25 $15 $21 $ per capita PARKS & RECREATION Facilities $20,141.7 $2,586.5 $17, % 100.0% 55,539 $ $ 1, Parkland Dev. $9,088.6 $1,623.5 $7, % 100.0% 55,539 $ $ Subtotal $29,230.3 $4,210.0 $25,020.3 $ $ 1, $1,403 $1,006 $599 $839 $73.20 per capita TRANSIT Facilities $273.5 $.0 $ % 71.8% 55,539 $ $ Vehicles $5,609.3 $1,720.0 $3, % 63.9% 55,539 $ $ Subtotal $5,882.8 $1,720.0 $4,162.8 $ $ $235 $168 $100 $141 $ per capita SOFT SERVICE TOTAL $50,030.5 $13,365.0 $36,676.6 $ $ 2, $2,093 $1,500 $893 $1,252 $1, per capita SANITARY SEWER PCP & Other Fac. $56,935.3 $4,593.6 $52, % 71.4% 101,317 $ $ 1, Sewer Trunks $47,159.3 $2,725.0 $44, % 91.3% 101,317 $ $ 1, $ 3, $ 2, $ 1, $ 2, $96,776.0 $ 3, $ per capita Minor San Sewers $17,321.2 $.0 $17, % 89.9% 101,317 $ $ $ $ $ Subtotal $121,415.8 $7,318.6 $114,097.2 $ 1, $ 3, $4,312 $3,094 $1,835 $2,571 $ WATER Distribution $30,529.3 $4,817.9 $25, % 64.7% 101,317 $ $ $ $ $ $ $ per capita Supply $17,673.4 $.0 $17, % 43.5% 101,317 $ $ $ $ $ $ Subtotal $48,202.6 $4,817.9 $43,384.7 $ $ 1, $1,764 $1,266 $751 $1,052 $1, per capita STORM Sewer Servicing $2,625.0 $.0 $2, % 61.3% 101,317 $ $ SWM Facilities $89,145.4 $.0 $89, % 72.4% 101,317 $ $ 2, $3, $2, $1, $2, $ per capita Minor Storm $13,365.2 $.0 $13, % 82.0% 101,317 $ $ $ $ $ $ $ per capita Minor SWM $36,574.2 $4,729.6 $31, % 80.5% 101,317 $ $ 1, $1, $ $ $ Subtotal $141,709.8 $4,729.6 $136,980.2 $ 1, $ 4, $4,879 $3,500 $2,076 $2,909 $2, per capita ROADS Major Roadworks $322,002.5 $24,943.4 $297, % 74.7% 101,317 $ 2, $ 9, $ 9, $ 6, $ 3, $ 5, $ per capita Minor Roads $41,016.0 $.0 $41, % 74.0% 101,317 $ $ 1, $ 1, $ $ $ Subtotal $363,018.5 $24,943.4 $338,075.0 $ 3, $ 10, $10,689 $7,668 $4,548 $6,373 $6, per capita HARD SERVICE TOTAL $674,346.8 $41,809.6 $632, , $ 20, $21,644 $15,527 $9,209 $12,906 $7, per capita GRAND TOTAL $724,377.3 $55,174.6 $669, , $ 22, $23,737 $17,027 $10,102 $14,158 RATES - excluding Water Supply $22,921 $16,441 $9,755 $13,671 S:\DC Project 2008\2008 Soft Services Future Needs\Transit\[Copy of Transit Amended Final xls]Transit- Future Faci Jan 1/09 DC rates in effect (which exclude Water Supply) $17,005 $13,221 $8,364 $11,729

36 34 TABLE 3-3 Non-Residential DC Rate Calculations Summary City Services and Urban Works Combined Summary of Development Charge Rates Non-Residential Service Sub-Component Allocation on Gross (%) Allocation on Net (%) Portion Of Works Collected In Prior Years COMMERCIAL INSTITUTIONAL INDUSTRIAL Total Net Cost Eligible For DC Rate Calculation Purposes (in, $000's) Sq. M. Final Calculated DC Rate/m² Allocation on Gross (%) Allocation on Net (%) Portion Of Works Collected In Prior Years Total Net Cost Eligible For DC Rate Calculation Purposes (in, $000's) Sq. M. Final Calculated DC Rate/m² Allocation on Gross (%) Allocation on Net (%) Portion Of Works Collected In Prior Years Total Net Cost Eligible For DC Rate Calculation Purposes (in, $000's) FIRE Facilities 12.0% 27.6% $.0 $ , % 18.4% $.0 $ , % 4.6% $.0 $ ,902 Vehicles 12.0% 45.4% $.0 $ , % 30.2% $.0 $ , % 7.6% $.0 $ ,902 Outfitting 12.0% $.0 $ , % $.0 $ , % $.0 $.8 380,902 Subtotal $.0 $ $.0 $ $.0 $ POLICE Facilities 0.0% 0.0% $.0 $.0 250, % 0.0% $.0 $.0 222, % 0.0% $.0 $.0 380,902 Vehicles 12.0% 12.0% $.0 $ , % 8.0% $.0 $ , % 2.0% $.0 $.5 380,902 Outfitting 12.0% 26.3% $.0 $ , % 17.5% $.0 $ , % 4.4% $.0 $ ,902 Subtotal $.0 $ $.0 $ $.0 $ CORPORATE SERVICES Growth Studies 11.5% 11.6% $.0 $ , % 4.4% $.0 $ , % 4.7% $.0 $ ,902 Subtotal $.0 $ $.0 $ $.0 $ LIBRARY Facilities 0.0% 0.0% $.0 $.0 250, % 0.0% $.0 $.0 222, % 0.0% $.0 $.0 380,902 Collections 0.0% 0.0% $.0 $.0 250, % 0.0% $.0 $.0 222, % 0.0% $.0 $.0 380,902 Subtotal $.0 $ $.0 $ $.0 $ PARKS & REC. Facilities 0.0% 0.0% $.0 $.0 250, % 0.0% $.0 $.0 222, % 0.0% $.0 $.0 380,902 Parkland Dev. 0.0% 0.0% $.0 $.0 250, % 0.0% $.0 $.0 222, % 0.0% $.0 $.0 380,902 Subtotal $.0 $ $.0 $ $.0 $ TRANSIT Facilities 12.3% 12.3% $.0 $ , % 4.9% $.0 $ , % 11.0% $.0 $ ,902 Vehicles 12.3% 15.8% $.0 $ , % 6.3% $.0 $ , % 14.1% $.0 $ ,902 Subtotal $.0 $1, $.0 $ $.0 $ SOFT SERVICE TOTAL $.0 $1, $.0 $ $.0 $1, SANITARY SEWER PCP & Other Fac. 6.8% 7.0% $216.9 $5, , % 5.6% $205.1 $4, , % 16.0% $.0 $11, , Sewer Trunks 2.3% 2.1% $128.7 $1, , % -0.1% $ $ , % 0.0% $.0 $3, , Minor San Sewers 6.7% 6.7% $.0 $1, , % 3.0% $.0 $ , % 0.4% $.0 $ , Subtotal $345.6 $7, $326.8 $4, $.0 $15, WATER Distribution 4.2% 4.2% $217.5 $1, , % 2.3% $94.5 $ , % 28.8% $.0 $11, , Supply 6.5% 6.5% $.0 $2, , % 2.5% $.0 $1, , % 47.5% $.0 $19, , Subtotal $217.5 $4, $94.5 $1, $.0 $30, STORM Sewer Servicing 9.0% 9.0% $.0 $ , % 4.9% $.0 $ , % 24.8% $.0 $1, , Water Mang't Facilities 10.6% 10.6% $.0 $13, , % 5.3% $.0 $6, , % 11.7% $.0 $14, , Minor Storm 12.0% 12.0% $.0 $1, , % 6.0% $.0 $ , % 0.0% $.0 $.0 678, Minor SWM 12.0% 13.0% $209.3 $5, , % 6.6% $83.5 $2, , % 0.0% $.0 $.0 678, Subtotal $209.3 $20, $83.5 $10, $.0 $15, ROADS Major Roadworks 11.0% 9.3% $10,704.4 $37, , % 5.0% $1,697.1 $20, , % 10.9% $.0 $43, , Minor Roads 11.0% 11.0% $.0 $6, , % 5.0% $.0 $2, , % 10.0% $.0 $5, , Subtotal $10,704.4 $43, $1,697.1 $22, $.0 $49, Sq. M. Final Calculated DC Rate/m² HARD SERVICE TOTAL $11,476.8 $75, $2,201.9 $39, $.0 $110, TOTALS- CALCULATED RATE $11,476.8 $77,539.3 $ $2,201.9 $40,589.6 $ $.0 $111,512.9 $ CALCULATED DC RATES - excluding Water Supply $ $ $ Jan 1/09 DC rates in effect (which exclude Water Supply $ $ $0.00

37 35 TABLE 3-4 Summary of Timing of Expenditures Timeframe for Growth Needs Capital Expenditures SUMMARY - by Service Funding for Portion to be incurred within anticipated 5 year term of by-law Component Project Name Gross Capital Cost Expenditure expected within 5 yrs (2013 & prior) Expenditure expected within 5-10 yrs ( ) Expenditure expected beyond 10 yrs (2019 & beyond) Total Benefit to existing development incurred in planning horizon) Total grants, contributions and prior funding Total Benefit to new development incurred in planning horizon) Fire Police Corporate Studies Library Recreation Facilities Parkland Development Transit $7,257,000 $4,994,000 $2,263,000 $0 $1,220,590 $450,000 $3,323,410 $7,540,414 $1,013,489 $1,934,225 $4,592,700 $104,771 $0 $908,718 $10,187,000 $7,513,500 $2,673,500 $0 $3,111,875 $0 $4,401,625 $10,250,000 $6,500,000 $3,750,000 $0 $1,474,039 $750,000 $4,275,961 $110,560,054 $28,532,765 $79,868,039 $2,159,250 $7,209,878 $12,340,000 $8,982,887 $32,115,000 $18,282,500 $13,832,500 $0 $6,170,317 $101,400 $12,010,783 $30,676,800 $25,572,800 $5,104,000 $0 $1,999,580 $19,500,000 $4,073,220 Total Soft Services $208,586,268 $92,409,054 $109,425,264 $6,751,950 $21,291,050 $33,141,400 $37,976,604 Roads Anticipated and Planned Projects (Aecom Table 4.1) $34,062,375 $26,688,000 $0 $7,374,375 $803,880 $3,488,000 $22,396,120 Forecasted Projects (Table 4.1) Other Existing Link Deficiencies (Aecom Table 4.1) $269,338,369 $10,312,500 $99,629,618 $159,396,250 $2,062,500 $250,000 $8,000,000 Other Future Screenline Capacity Improvements and Connections (Aecom Table EX-2) $60,980,938 $0 $10,625,938 $50,355,000 $0 $0 $0 New Additional Projects (Aecom Table EX-2) $88,849,891 $1,181,000 $17,533,906 $70,134,984 $0 $0 $1,181,000 Studies/Other (Aecom Table 5.1) $26,430,000 $12,420,000 $5,670,000 $8,340,000 $0 $0 $12,420,000 2 Lane Road Upgrades (Aecom Table 5.1) $72,625,625 $6,942,813 $29,999,906 $35,682,906 $44,000 $2,850,000 $4,048,813 New Traffic Signals - Aecom Table 4.3 $4,078,125 $1,019,531 $1,019,531 $2,039,063 $0 $0 $1,019,531 Channelization - Aecom Table 4.4 $9,900,000 $2,475,000 $2,475,000 $4,950,000 $0 $0 $2,475,000 Miscellaneous Works - Aecom Table 4.5 $7,445,531 $1,861,383 $1,861,383 $3,722,766 $0 $0 $1,861,383 Additional Projects $5,100,625 $1,275,156 $1,275,156 $2,550,313 $0 $0 $1,275,156 Total Roads $655,511,778 $93,076,058 $185,944,439 $376,491,282 $4,427,350 $8,093,000 $80,555,708 Claimable Minor Roadworks Sanitary - CSRF Sanitary - UWRF Storm & SWM - CSRF Storm & SWM - UWRF Water Distribution Water Supply $55,426,974 $13,856,744 $13,856,744 $27,713,487 $0 $0 $13,856,744 $222,076,585 $80,905,279 $51,693,219 $89,478,087 $24,812,424 $0 $56,092,855 $34,209,629 $20,971,457 $10,738,171 $2,500,000 $241,539 $3,323,385 $17,406,534 $179,229,700 $73,243,508 $56,524,428 $49,461,765 $10,176,000 $1,202,013 $61,865,495 $94,469,456 $30,828,893 $21,213,521 $42,427,041 $0 $7,905,693 $22,923,201 $117,934,941 $78,419,778 $26,326,438 $13,188,725 $5,608,350 $55,877,000 $16,934,428 $162,213,395 $101,213,395 $61,000,000 $0 $31,840,500 $46,141,500 $23,231,395 Total Hard Services $1,521,072,458 $492,515,112 $427,296,958 $601,260,387 $77,106,163 $122,542,591 $292,866,359 Grand Total $1,729,658,726 $584,924,166 $536,722,222 $608,012,337 $98,397,212 $155,683,991 $330,842,963 34% 31% 35% 17% 27% 57% SUMMARY - Funding Responsibilities Funding for Portion to be incurred within anticipated 5 year term of by-law GROWTH NEEDS - CAPITAL EXPENDITURE TIMING SUMMARY Gross Capital Cost - Growth Needs Expenditure expected within 5 yrs (2008 & prior) Expenditure expected within 5-10 yrs ( ) Expenditure expected beyond 10 yrs (2014 & beyond) Total Benefit to existing development incurred in planning horizon) Total grants, contributions and prior funding Total Benefit to new development incurred in planning horizon) City Services- Capital Budget $1,357,979,280 $411,044,388 $419,819,609 $527,115,282 $66,210,402 $98,313,413 $246,520,573 Urban Works - old rules - developer lead $85,075,070 $41,181,431 $15,397,828 $28,495,812 $241,539 $0 $40,939,892 Urban Works - new rules - developer lead $99,030,988 $24,475,664 $30,410,608 $44,144,717 $0 $11,229,078 $13,246,586 City Services - Debt re prior growth $25,359,992 $7,009,288 $10,094,178 $8,256,526 $104,771 $0 $6,904,517 Joint Water Boards (including debt) $162,213,395 $101,213,395 $61,000,000 $0 $31,840,500 $46,141,500 $23,231,395 Grand Total $1,729,658,726 $584,924,166 $536,722,222 $608,012,337 $98,397,212 $155,683,991 $330,842,963 34% 31% 35% 17% 27% 57% Notes 1 Some of the cost estimates above a gross estimates of the total cost to be incurred by a development proponent. 2 The timing of Urban Works expenditures cannot be determined with any certainty as they depend on construction by each development proponent. Unless claims have already been submitted, the estimates have been spread evenly

38 36 4 Chapter 4 The Development Charge By-Law The Development Charges By-law incorporates a number of changes which were discussed in the previous chapters and in the covering report that accompanies the tabling of this study. 4.1 Calculated Rates The draft by-law also incorporates the full calculated rates as reflected in the summary tables in chapter 3. For ease of reference, the calculated rates are also provided below. This schedule includes the calculated Industrial rate (though Council has already decided to continue to exempt this form of development) and excludes the Water Supply component. TABLE 4-1 PROPOSED RATES CSRF rates TABLE 1 Line Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Single & Semi Detached (per dwelling unit) Rowhousing (per dwelling unit) Apartments with < 2 bedrooms (per dwelling unit) Apartments with > = Commercial per 2 bedrooms (per sq. m. of gross dwelling unit) floor area Institutional per sq. m. of gross floor area 1 Service Component: 2 Fire Services * Police Services * Growth Studies * Library Services * Parks & Recreation * 1, , Transit Services * Roads Services * 9, , , , Sanitary Sewerage 3, , , , Water Supply Water Distribution Major SWM 3, , , , Total CSRF rate (applied within Urban Gr Area) 19, , , , Rural rates (applied outside Urban Growth Area) - denoted by * above - see by-law section 42 11, , , , UWRF rates TABLE 2 Line Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Single & Semi Detached (per dwelling unit) Rowhousing (per dwelling unit) Apartments with < 2 bedrooms (per dwelling unit) Apartments with > = Commercial per 2 bedrooms (per sq. m. of gross dwelling unit) floor area Institutional per sq. m. of gross floor area 1 Service Component: 2 Minor Roadworks 1, Minor San. Sewers Minor Storm Sewers subtotal - UWRF General Fund 2, , , Minor SWM 1, Total UWRF rate (applied within Urban Gr Area) 3, , , , TOTAL RATE - within Urban Growth Boundary (Table 1 + Table 2) $22, $16, $9, $13, $ $108.64

39 Comparison to Existing Rates Some insights into how the cost sharing of growth costs is changing can be gleaned from comparing the calculated rates to those currently in effect. The above proposed rates are compared to the schedule of rates under the existing by-law (including all amendments and indexing to January 1, 2009) in the following table. TABLE 4-2 COMPARISON OF PROPOSED RATES WITH EXISTING RATES CSRF rates Existing rates - Effective January 1, 2009 Change in calculated rates from existing rates increase or <decrease> 1 Service Component: Single & Semi Detached (per dwelling unit) Commercial per sq. m. of gross floor area Institutional per Single & Semi sq. m. of gross Detached (per floor area dwelling unit) Commercial per sq. m. of gross floor area Institutional per sq. m. of gross floor area 2 Fire Services * (285.00) Police Services * (14.00) Growth Studies * Library Services * (162.00) Parks & Recreation * Transit Services * (101.00) Roads Services * 3, , (46.78) (1.76) 9 Sanitary Sewerage 2, , (11.78) 10 Water Supply Water Distribution 1, (709.00) (1.69) (4.04) 12 Major SWM , Total CSRF rate (applied within Urban Gr Area) 10, , (0.58) 6.85 Rural rates (applied outside Urban Growth Area) - denoted by * above - see by-law section 42 5, , (38.31) 2.28 UWRF rates Single & Semi Detached (per dwelling unit) Commercial per sq. m. of gross floor area Institutional per Single & Semi sq. m. of gross Detached (per floor area dwelling unit) Commercial per sq. m. of gross floor area Institutional per sq. m. of gross floor area 1 Service Component: 2 Minor Roadworks 1, (569.00) (55.39) (17.17) 3 Minor San. Sewers 1, (922.00) Minor Storm Sewers 1, (1,136.00) (0.58) (0.99) 5 subtotal - UWRF General Fund 4, (2,627.00) (53.62) (17.46) 6 Minor SWM 2, (1,023.00) Total UWRF rate (applied within Urban Gr Area) 6, (3,650.00) (48.60) (15.59) TOTAL RATE - within Urban Growth Boundary (line 13 + line 7 above) 17, , (49.18) (8.74) Existing DC rates - Jan , Calculated Rates DC Background Study 22,

40 38 Some observations about the differences in the calculated rates compared to existing rates follow (see also, discussion of changes to rates in DC covering report tabled May 13 09): (a) General increase to all infrastructure rates due to rapidly escalating servicing costs in the past 5 years (b) Major increase in Roads rates as a result of differences in approach to determining growth and non-growth splits, as well as RICI (Residential, Institutional, Commercial, Industrial) allocations of growth benefits; (c) Increase in CSRF rates for Roads, Sanitary and Major SWM works as a result of shift in responsibility for funding from the UWRF, as recommended by the Blue Ribbon Panel Report (2006). The scope of future funding from the UWRF has narrowed while certain future projects will be funded from CSRF. Rate increases in the CSRF are offset by rate declines in the UWRF; (d) Currently, there are no non-residential rates levied for Soft Services. A change to full funding for all services is recommended; (e) Changes in Residential soft service rates (Fire, Police, Growth Studies, Library, Parks & Recreation and Transit) account for a small portion of the overall change in Residential rates (overall increase of $69/sfu compared to existing CSRF rate at January 1, 2009). 4.3 Implementation of New Rates The revised by-law is recommended to be implemented coincident with the expiry of the existing by-law in August, 2009.

41 39 Appendix A - Growth Forecasts A.1 Growth Forecast In September, 2006, Clayton Research Associates Limited completed on behalf of the City, an update of the 30 year growth projection prepared in The report, entitled Employment, Population, Housing and Non-residential Construction Projections, 2006 Update contained growth forecasts that were used primarily to assess land needs for an Official Plan Amendment (2008). Clayton Research Associates Limited (Clayton) have extensive experience in preparing growth forecasts, having prepared such forecasts for a multitude of municipalities, developers, agencies and other levels of government over the past three decades. In September, 2006, their study was finalized and presented to Council. The forecasts were subsequently incorporated into the Land Needs Study adopted by Council. The forecasts in the Clayton report were also used as a foundation for the 2009 DC Background Study. To make the information consistent with the growth planning window used in the 2009 DC study, population projections from the 2006 were first updated by Clayton in The figures in the 2007 update were then used to interpolate revised forecasts for 2008 & beyond required for this DC study. The 2008 forecasts form the basis of the forecasts used to project growth related capital needs in the DC study and provided the quantum of growth over which costs were spread and DC rates were calculated. This section reports in condensed form, the contents and conclusions of the study that are pertinent to the development charge rate setting process. A.1.1 Growth Forecast Methodology The methodology applied to the growth forecast is reviewed in detail in chapter 2 of the 2006 Clayton report. The study involved several phases to arrive at the ultimate forecasts of housing and non-residential construction activity including: 1. Projections of employment, taking into account the macroeconomic environment for Canada and Ontario as well as the economic development scenario for the City of London. 2. Population projections by age and sex using a standard cohort survival model. This model recognizes births and deaths and derives net migration as a function of the employment growth forecasts described above (ie. the model recognizes that people move to London (net migration) as employment opportunities grow in London). 3. A housing model projects the anticipated household growth associated with the population projections. This model relies on assumptions regarding headship rates (the propensity of persons within an age group to head up a household) 4. A non-residential building space model produced projections based largely on employment growth projections presented in the economic model (see 1. above).

42 40 A.1.2 Historical Building Activity Levels The report prepared by Clayton provides a full account of historical employment, population, housing and Industrial, Commercial & Institutional (ICI) floor space growth in London. The following is an excerpt of this information: Table 1 Table 1 (above) shows employment growth, by industry, in the London Census Metropolitan Area (CMA). It shows London s largest industrial sectors Manufacturing, Trade and Health Care Services - and also shows trends (both decline & growth) of industrial sectors in London s economy.

43 41 A.1.3 Population Growth Forecast Population growth is a function of several variables. Birth, death and net migration forecasts were applied to existing populations to project forecast population by age group. Table 2 shows both historical and projected population by age group (cohorts). Table 2

44 42 A.1.4 Headship Rates Headship rates measure the proportion of the population in a specific age cohort that is head of household. Headship rates are low among teen aged population and rise rapidly in the year old cohorts. The highest headship rates are in the over 50 crowd. The headship rates reflect the reality that the growth in households in London will come from both overall population growth, and growth in cohorts that display the highest headship rate. Table 3 shows headship rates by age cohort and their relationship to the population forecast by cohort. Table 3