Development Charges Someone Has to Pay, But Who? Lynda Cooke Urban Systems Joel Short Urban Systems Kathy Dietrich City of Calgary Shanie Leugner City of Regina Kim Sare City of Regina
WORKSHOP OVERVIEW Presentation: Development Charges 101 Workshop: Exploring Stakeholder Perspectives BREAK (10 min) Workshop: Presentation: BREAK (10 min) Workshop: BREAK (10 min) Presentation: Wrap Up: Bringing Together Perspectives Calgary & Regina The Process Mock Technical Review Calgary & Regina The Policy Summary and Q&A
PRESENTATION Development Charges 101
Development Charges 101 CIP Conference June 2017
What are Development Charges? A means of pooling funds from a number of developers to pay for off-site capital projects which benefit them all. Off-Site Levies Service Agreement Fees & Development Levies Development Cost Charges No Specific Legislation or Term Alberta Saskatchewan Ontario British Columbia Manitoba Quebec Nova Scotia New Brunswick Newfoundland Prince Edward Island
Growth Cost Recovery Tools Options Vary by Jurisdiction: Parkland Municipal Reserve Dedication Density Bonusing Specified Area Charges or Local Improvement Tax Development Charges Community Amenity Contributions Grants/Cost Sharing Developer Funded- Latecomers/ Endeavors to Assist General Revenue Tax Incremental Financing Comprehensive Works and Services Agreements
Context is Key Legislation Rate of Growth Infrastructure Needs Financial Capacity of the Municipality Risk Tolerance Political Context Growth Pays For Growth
Understanding CONTEXT Through a Collaborative PROCESS Political Public Development Industry
Approach to Determining Charges Forecast Growth Plan What development are we planning for? Determine Infrastructure Needs What infrastructure is needed to serve the growth plan? Develop Infrastructure Delivery Philosophy Who builds what? Allocate Benefit Create Financial Model How much of the project can be charged to growth? How do we allow for inflation, interest and debt costs? Determine Charge Structure How will the charge applied to development?
Forecast Growth Plan Forecast Growth Plan What will be the assumed growth rate? How will this growth be distributed across the municipality?
Determine Infrastructure Needs Undertake Master Plans to determine infrastructure needs to serve the growth plan Compile List of Growth Related Infrastructure Required
Develop Infrastructure Development Philosophy CONSIDER: Legislation Does Growth Pay For Growth? Developer Funded Options Endeavours to Assist Debt Capacity Financial Risk Capacity of the Municipality Leading vs. Lagging Infrastructure
Allocate Benefit Legislation & Case Law set expectations for Allocating Benefit to Existing Users Sewer Twinning vs. Replacement New Treatment Plant vs. Upgraded Treatment Plant New Bridge vs. Bridge Widening
Create Financial Model Current Fund Balances Municipal-Wide vs. Area-Specific Charges Revolving Window vs. Build-Out Window Timeframe Financial Projections Model vs. Present Day Model DC Recoverable Costs Growth = DC Rate
Determine Charge Structure How will charges be applied to various land-use types and redevelopment? Apply charges by: Hectare Unit Sq. M. for Non-Residential Timing of Application of Charges Timing of Payment of Charges
Thank You!
WORKSHOP 1 Exploring Stakeholder Perspectives
Exploring Stakeholder Perspectives Read the scenario and your interest in the project. Your table represents a different stakeholder (Greenfield Developer, Infill Developer, Homebuyer, Taxpayer, Council) Discuss some questions about how you feel about the options, and some questions or suggestions you could make to address those concerns.
Exploring Stakeholder Perspectives 1 2 Which group were you? What were your feelings about the proposed policy options? 3 What changes would you suggest?
WORKSHOP 2 Bringing Together Perspectives
Bringing Together Perspectives In this exercise, all of you will consider yourselves as a Senior Planner in Cityville. You are responsible for bringing the project to a successful conclusion. In your tables, discuss: 1 What could you do to find a solution that would meet everybody s needs? (thinking about what you just heard from the round table) 2 What are some questions or suggestions you could make to Cityville Council, the taxpayers, and the land developers that would enable you to support a policy direction?
Bringing Together Perspectives 3 What could you do to find a solution to meet everyone s needs? 4 What were some questions or suggestions you came up with to ask or propose to others?
PRESENTATION Calgary & Regina The Process
Calgary and Regina Both updated their Development Charges in 2015 Facing a challenging development market in an uncertain economy Significant infrastructure upgrades required to service growth Needed to build trust through transparency to Transform Business as Usual Both engaged in an extensive process with the development community to gain understanding and support
Calgary The Process Development Charges Someone Has to Pay But Who? Building Resilience 2017 Saturday June 17, 2017
Issues with Off-Site Levy Off-Site Levy Bylaw had not been updated for 5 years Previous methodology did not capture 100% of costs Calculation process was not transparent Did not charge for redevelopment
The Process Conducted best practices research Established a process framework and timelines Established working groups Developed a broad stakeholder consultation strategy Phases: o o o o Projected population growth Identified infrastructure needs Estimated costs Calculated levies
Guiding Principles Guiding Legislation Certainty Policy Alignment Financial Sustainability Accountability Collaboration Efficiency Competitiveness Benefit Allocation Fairness & Equity o Clarity & Transparency
What We Heard
Working Groups Groups Members Role # of Meetings Internal Working Team Internal staff (crosscorporate) Research Calculations Options analysis 32 External Advisory Committee Developers (Greenfield and Established Areas) Internal staff Provide advice Feedback on options 12 Technical Subcommittee Developers Consultants Internal staff Scrutinize calculations 20 Established Area Group Inner City Developers (residential, commercial/ industrial) Internal staff Review established area proposals Develop transition options/incentive program 12
What We Learned Complexity Transparency Engagement Collaboration Data Feedback Refinement
Regina The Process Development Charges Someone Has to Pay But Who? Building Resilience 2017 Saturday June 17, 2017
34 What did we need? Policy that aligns with Official Community Plan and enabled its implementation Detailed policy on Servicing Agreement Fees that aligned with Growth Pays for Growth policy in OCP
35 Process Phase 1 Develop Options Phase 2 Preferred Option ENGAGEMENT Phase 3 Approval
36 Considered Various Variables What infrastructure projects were needed for growth How to allocate project costs between Development Charges, Developer Directly and City Including use of tax/utility and/or debt When projects were needed based on: Land development phasing plan and Impact on the City s cash flow
37 Engagement Overview 12 Sessions with Working Group Greenfield developers Infill developers Economic development organizations Homebuilders Open and grassroots-like process Worked to seek consensus on policy
38 Engagement Overview PLUS 2 Focus Groups with Taxpayers Telephone Survey with Taxpayers Number of Emails distributed to Interested Parties 6 Briefings with City Council Numerous workshops and sessions with staff
What Did We Learn? 39
Beware the Red Herring 40
41 Use Simple Messaging Other Fees and Charges Development Charge Rates Cash Flow City Debt Tax & Utility Rates
42 Recognize the Competitive Environment City transparent but developers can t always be Risk of a no win situation Lengthy, consultative process built long-term trust but was not the fastest approach to resolve this particular policy issue It was the long way around
WORKSHOP 3 Mock Technical Review
Mock Technical Review At your table, you ll find: Map Population projections Project Lists Provincial legislation Information about the community: interest in intensification, industrial development, debt limit capacity, redevelopment goals, etc.
Mock Technical Review Table 1/6: Large City in Alberta (250,000+) Table 2/7: Medium City in Saskatchewan (100,000-200,000) Table 3/8: Small city in Alberta (25,000-35,000) Table 4/9: Town in BC (5,000-15,000) Table 5/10: Rural Municipality in Alberta
Mock Technical Review 1. Determine what projects to include in your development charges (DC) program and why? 2. For each project that you include in your DC Program: a) Determine the possible methods you could use to allocate the benefit to existing development and to growth. b) Determine if you will charge the project on a municipality-wide or an areaspecific (catchment basis). Why? c) Determine if you will apply the charges to redevelopment or infill development. Why or why not? 3. Calculate the rate(s) for your development charge. 4. As you are developing your policy and rate, your municipality has hit an economic down-turn and development has slowed significantly. What considerations or concessions will you suggest to your Council with respect to the implementation of the new charges?
PRESENTATION Calgary & Regina The Policy
Regina The Policy Development Charges Someone Has to Pay But Who? Building Resilience 2017 Saturday June 17, 2017
REGINA Key Policy Directions 49
50 Key Policy Directions 1. Charge city-wide per hectare rate. Explored area-specific rates Explored development of land-use equivalency rate
51 Key Policy Directions 2. Maintain the OCP s growth pays for growth policy. Eligible growth-related capital costs were assigned to growth. Included major projects, including interchanges which significantly impacted the rate Related to discussion about who most benefits from projects should pay for the projects
52 Key Policy Directions 3. Focus DCs on system-wide infrastructure. Projects internal to subdivision were no longer eligible for DC funding Impacted all drainage projects, lift stations and some roads Reduced risk to the City
53 Key Policy Directions 4. Phase-in DCs Rates over three years. 2015 Rates: 235k areas: $304,960 300k areas: $359,089 Council-Approved Rates:
235K & 300K Neighbourhoods 54
Development Charge 55 Reserve Balance Projected DC reserve balance to be maintained at a deficit within $60M Actual DC reserve balance will be impacted by annual budget decisions and the pace of development. Maximum Deficit of ~ - $60 million
56 Development Charges and the Cost of a House $500,000 Cost of a House vs. DCs / Unit $400,000 $300,000 $200,000 $100,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
57 Key Policy Directions 5. Assign a portion of growth-related costs to intensification. Resulted in removal in an Exempt Area that had been established in 1989 Improved transparency: previously costs of some projects were paid for by greenfield development Undertaking a study on how the costs associated with intensification will be covered
58 Anticipated Outcomes Long-term financial risk to taxpayers is minimized. Market choice is available. Neighbourhoods will build out faster. Reasonable service level is provided to both existing and new residents. The City can continue to invest in and renew existing infrastructure systems.
59 Next Steps Determining development charge policy for intensification of development within existing areas Conducting research on the barriers to industrial development
Calgary The Policy Development Charges Someone Has to Pay But Who? Building Resilience 2017 Saturday June 17, 2017
Calgary s Growth and Infrastructure Context High growth for many years creating demand for infrastructure Savvy development industry Political desire to minimize financial risk and to have a transparent and fair levy system Increasing redevelopment/intensification Alberta legislation limits what levies can be charged for Levy calculations were based on these assumptions (some things have changed)
861 861 Population (000) 905 922 933 956 992 1,020 1,043 1,065 1,072 1,091 1,120 1,157 1,195 1,231 1,235 Calgary has been growing fast. 1300 1200 2013 1100 1000 1991 900 Today s Boundary 800 700 More people + 374,000 since 2000 More land Spatial growth of +134 km 2 between 1991 and 2013.
What Infrastructure was included? Water/wastewater Treatment plants and linear connections Drainage Stormwater ponds Roads Major interchanges Community Amenities (voluntary charge) Regional recreation centres, fire stations, police stations, libraries, transit buses Redevelopment Initiated a treatment plant charge per unit
Allocation of Benefit Determined based on fairness (for both Greenfield and Established Areas) Determined based on development paying 100% of growth impact Developed different models for each infrastructure type: o o o Transportation traffic modeling Considered impact of traffic from outside of Calgary Water/waste water, drainage - based on actual needs Community amenities based on a hypothetical population projection model
Area Wide VS Site Specific? Greenfield o o o All infrastructure calculations based on city wide needs and averages everyone pays the same A per hectare charge (with the exception of drainage, which are based on catchments) Costs can vary greatly from one side of the municipality to the other (prairie vs foothills) Established Areas o Per unit charge based on unit type
Where do the levies apply? Off-site Levy Greenfield Area Components 2015 Levy ($/ha) 2016 Levy ($/ha) Transportation $130,289 $136,789 Water and Wastewater Linear $38,006 $76,774 Water and Wastewater Treatment $36,967 $129,660 Drainage by Watershed 1 Nose Creek Watershed $10,315 $11,325 2 Shepard Watershed $56,158 $42,704 3 Bow River Watershed $3,980 $6,983 4 Pine Creek Watershed $3,939 $16,812 5 Fish Creek Watershed $634 $0 6 Elbow River Watershed $342 $0 Water Resources $75,315 to $131,131 $206,434 to $249,138 Off-site Levy Total $205,604 to $261,420 $343,223 to $385,927
Change to Community Services Charges (Greenfield Areas) Community Services Greenfield Area Components Community Services Charge 2015 Levy ($/ha) 2016 Levy ($/ha) Calgary Fire Department $22,275 $19,545 Calgary Public Library $6,389 $5,971 Calgary Police Service $8,633 $7,648 Recreation $37,985 $41,679 Calgary Transit $5,806 $4,007 Community Services Charge Total $81,088 $78,850 2015 Levy ($/ha) 2016 Levy ($/ha) Total Greenfield Off-site Levy and Community Service Charge $286,692 to $342,508 $422,073 to $464,777
Established Areas Application of Off-Site Levies No Off-site Levies Charged Centre City Levy Off-site Levies Paid Developed Areas Off-site Levies Paid Greenfield Areas
Established Areas Application of Off-Site Levies No Off-site Levies Charged Development Permits, 2011-2014 Commercial/Mixed Use (164) Multi-Family (351) Single/Semis (3,915)
Established Area Rates ($/unit, $/m 2 ) Residential Rate ($/Unit) Single Detached $6,267 Semi-Detached/Duplex $5,619 Multi-residential Grade-Oriented $3,890 Multi-residential Non Grade-Oriented (2 bedroom or more) $3,242 Multi-residential Non Grade-Oriented (1 bedroom or less) $2,593 Non-Residential Rate ($/m 2 Gross Floor Area) Commercial Development Levy Rate $36.62 Industrial Development Levy Rate $17.58 Maximum levy rate for Density 285 Equivalent Population/Hectare: $615,885/Ha
Density Incentive Program 1. Determine the site intensity: people + jobs 2. Determine the site density: (people + jobs)/area 3. If (people + jobs)/area is greater or equal to 285 4. Then the rate is capped at $615,885/ha Note: $2161 x 285/ha = $615,885/ha ($2161 is the per person treatment plant cost)
Greenfield Area Implementation February 1, 2016 Timing of Payment: o o o o 0 % payable at execution of an Interim Indemnity Agreement 30% - 1 year anniversary 30% - 2 year anniversary 40% - 3 year anniversary
Established Area Implementation Established Area: o Development Permits accepted prior to February 1st exempt o Phase in approach: o 2016 33% o 2017 66% o 2018 100% o Density Incentive Program o Timing of Payment Occupancy
$97,290 $141,148 $148,594 $171,450 $203,301 $218,000 $271,656 $302,486 $315,835 $400,606 $421,610 $435,373 $447,472 $451,000 (in 2018) $506,196 $590,116 $663,498 $1.2M Development Charges across Select Canadian Municipalities ($/ha) $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0
Percent of New Home Sale Price Approximate Percentage of New Home Price Attributed to Levies (%) 10.0 9.0 8.0 7.0 6.0 5.0 4.5 4.9 (in 2018) 4.0 3.0 2.4 2.7 3.3 2.0 1.0 0.0 CALGARY - EXISTING Edmonton CALGARY - PROPOSED Saskatoon Regina
Conclusion/ What We Learned Aligned with guiding principles Transparent/rigorous methodology Long term and sustainable strategy for funding the costs of growth Broad stakeholder engagement Off-site levies paid by development industry will help to continue to build great communities Captures 100% proportionate share Collaborative process internally and externally was the key to success Built trust and set the stage for continued collaboration
WRAP-UP
Key Policy Questions 1. Is growth going to really pay for growth or is the community (taxpayers) going to help pay for growth? 2. What types of projects are you going to include and how are you going to allocate a portion of each project to growth?
Key Policy Questions 3. How much growth do you expect and what impact does that growth have on infrastructure? 4. Are you going to charge on a community wide bases or area specific?
Key Policy Questions 5. How are you going to deal with infill and intensification? Are you going to allocate costs to infill or focus mainly on greenfield? 6. How your development charge policies interact with your land use and growth policies: Infill; Greenfield; Downtown Core; Industrial Areas?
Key Policy Questions 7. Will you be gradually phasing in the increases in charges or not? How often will you update the charges? Annually? Every 5 years? 8. How do your charges compare with others?
Questions and Comments
THANK YOU!