By Anne Finlay-Stewart
Facebook should come with a warning similar to your car mirror's: "Subjects in your newsfeed may not be as simple as they appear."
On December 18, the City of Owen Sound held a meeting about development charges (DCs) to give developers and the public a chance to hear from Gary Scandlan of Watson and Associates, the consultant who is advising the city, and to ask questions about this complex subject.
There were useful charts, hand-outs, and a clear presentation that has been on the city's website for the past two weeks, along with the 180-page background study, for public consideration.
In local social media discussions, the issue has already been reduced to hyperbole and a yes-no poll.
Development charges, or lot levies, have been regulated under the provincial Development Charges Act since 1997 to "recover specified capital costs associated with residential and non-residential growth" - things like roads, fire equipment, police cars, water, sewage and recreation infrastructure. Owen Sound has been charging DCs to builders and developers since 1999.
The current conversation is not about whether or not these expenses will be incurred, but where the money will come from to pay for them. The choices? Developers, city reserves or the taxpayers of Owen Sound, or most likely all three in some proportion.
For a new single-family home, the proposed increase in the development charge takes it from $7,008 to $10,723. Expressed as a 53-per-cent jump, it sounds enormous. But even if it were imposed immediately (the last increases were phased in over five years) and entirely passed on to the buyer (generally the developer swallows some), the new DC would increase the price of that average new home in Owen Sound less than 1.3 per cent. Hardly a deal-breaker, especially amortized over the life of a mortgage.
A local builder who holds undeveloped land in the city has suggested publicly that DC charges cause home buyers to choose a municipality such as Georgian Bluffs over Owen Sound. The consultant has noted that Georgian Bluffs itself is considering introducing residential development charges for the first time this year, and that homes built in that area often have the significant added costs of wells and septic systems.
Assessing the potential impact of DCs on the rate of development and on planning is one of the most difficult policy issues for municipalities in this process, according to the consultant's report. To what degree do low fees attract development and higher fees deter it? An annotated bibliography of twenty-eight studies only reinforces the challenge – the answer appears to depend on many factors.
Orangeville, measured against provincial averages, has both higher than average development charges and property taxes. And plenty of residential growth. Of course those residences are 90 minutes closer to the GTA. Stayner and Collingwood have yet higher residential DCs than Orangeville – and still building, but they are closer to a 400-series highway. Could lower development charges compensate for the relative convenience of these municipalities and attract home-buyers?
Perhaps a better comparable is Brockville. A city with a population almost identical to Owen Sound, Brockville suspended its residential development charges in 2009 in hopes of encouraging growth. Developers there made the same arguments developers are making to Owen Sound council. Five years into the experiment, city staff recommended the DCs be reintroduced and most of Brockville council agreed. The charges began again in July 2014, too recently to measure the outcome.
The recently re-elected mayor of Brockville said "Any dollar that is on a development charge is a dollar that is not on the tax base. This is a tool that we need in our repertoire... we are trying to invest in this community to make it more attractive."
In other words, municipal property taxes will have to cover whatever expenses development charges do not. The same relatively small amount of money can be used to provide incentives to builders and buyers, to control property tax increases and to invest in services that attract residents. The ratio is all that is up for debate.
The public meeting Monday, January 12 at 7 p.m. in the Owen Sound council chambers will be the best opportunity for members of the public to hear the rationale behind the consultant's recommendations and to ask questions. Development charge recommendations for multi-unit residential buildings and non-residential developments will also be presented.
The DC by-law will likely come to council for a final decision in February, as the existing by-law expires mid-March.
Anne Finlay-Stewart is Community Editor of Owensoundhub.org. She can be reached at [email protected].
