[Glen]

On average in the GTA (excluding Toronto), the development fees per single family dwelling unit is $36,222. In Toronto it is $12,910. Giving us a difference of $23,312 per unit. Toronto has had over 10,00 starts per year since 2001. Some years it has been over 20,000 starts per year. If we use an average of 15,000 per year and apply a development fee of $36,222 per unit the city would generate $349,680,000 per year in additional revenue.

http://www.yourhome.ca/homes/realestate/article/770395--development-charges-a-concern-for-developers

 

[GraphicMatt]

It sounds like a good idea, but wouldn't the real estate industry flip the hell out like they did over the Land Transfer Tax and claim this would be the death of the condo boom in Toronto?

 

[taal]

Look who published the report ... of course they'd flip ...

I'm sure they'd get the media to portray the situation like Toronto already has the highest <insert anything here>.

Anyway, I think this should be equalized along side the commercial property taxes ... I didn't know we had this huge source of potential income ... I wonder if any of the potential mayors are considering this.

 

[GraphicMatt]

Does anyone know what kind of margin developers are seeing on units? It's got to be fairly huge, especially with square footage shrinking and build quality looking iffy in a lot of cases.

 

[AlvinofDiaspar]

I don't think the provincial legislation allow development charges to be used as general revenues - it must be tied into new/expanded infrastructure that is required as a result of development.

AoD

 

[TOareaFan]

Like most things, you can't just look at development fees in isolation and say "we have this many starts per year so if we multiplied my proposed higher fees by the average number of starts we would generate X"

Perhaps, the number of starts is partly influenced by the seemingly lower development fees? Perhaps, the purchasers of these units would see the higher fees (afterall it is, ultimately, the purchaser not the developer who pays these fees) combined with the higher land transfer tax as a reason to say "no, I will move to Milton"...perhaps the whole move to downtown intensification just stops?

Like most things, I don't have the answers at hand....I do know solving Toronto's fiscal problems is more complicated than tripling development fees.

 

[Glen]

I don't think the provincial legislation allow development charges to be used as general revenues - it must be tied into new/expanded infrastructure that is required as a result of development.

AoD

Correct. Except that what constitutes general revenue is a grey area. The Development Charges Act allows for fees to cover.......

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_97d27_e.htm

Capital costs, inclusions

(3) The following are capital costs for the purposes of paragraph 7 of subsection (1) if they are incurred or proposed to be incurred by a municipality or a local board directly or by others on behalf of, and as authorized by, a municipality or local board:

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. furniture and equipment, other than computer equipment, and

iii. 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 4.

6. Costs of the development charge background study required under section 10.

7. Interest on money borrowed to pay for costs described in paragraphs 1 to 4. 1997, c. 27, s. 5 (3).

Capital costs, leases, etc.

(4) Only the capital component of costs to lease anything or to acquire a leasehold interest is included as a capital cost under subsection (3). 1997, c. 27, s. 5 (4).

Services with no percentage reduction

(5) The services referred to in paragraph 8 of subsection (1), for which there is no percentage reduction, are the following:

1. Water supply services, including distribution and treatment services.

2. Waste water services, including sewers and treatment services.

3. Storm water drainage and control services.

4. Services related to a highway as defined in subsection 1 (1) of the Municipal Act, 2001.

5. Electrical power services.

6. Police services.

7. Fire protection services.

8. Other services as prescribed. 1997, c. 27, s. 5 (5); 2002, c. 17, Sched. F, Table.

 

[AlvinofDiaspar]

Yes, but the determination of the charges is a set process - you can't just slap anything and the kitchen sink in there:

Determination of development charges

5. (1) The following is the method that must be used, in developing a development charge by-law, to determine the development charges that may be imposed:

1. The anticipated amount, type and location of development, for which development charges can be imposed, must be estimated.

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.

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.

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 10. How the level of service and average level of service is determined may be governed by the regulations. The estimate also must not include an increase in the need for service that relates to a time after the 10-year period immediately following the preparation of the background study unless the service is set out in subsection (5).

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. How excess capacity is determined and how to determine whether a council has indicated an intention that excess capacity would be paid for by new development may be governed by the regulations.

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. The extent to which an increase in service would benefit existing development may be governed by the regulations.

7. The capital costs necessary to provide the increased services must be estimated. The capital costs must be reduced by the reductions set out in subsection (2). What is included as a capital cost is set out in subsection (3). How the capital costs are estimated may be governed by the regulations.

8. The capital costs must be reduced by 10 per cent. This paragraph does not apply to services set out in subsection (5).

9. Rules must be developed to determine if a development charge is payable in any particular case and to determine the amount of the charge, subject to the limitations set out in subsection (6).

10. The rules may provide for full or partial exemptions for types of development and for the phasing in of development charges. The rules may also provide for the indexing of development charges based on the prescribed index. 1997, c. 27, s. 5 (1).

AoD

 

[Observer Walt]

So just toss an additional $24,000 on top of the price of every new house or apartment? Good luck getting that one to fly!

It might be that a small, repeat small, increase would be warranted. That would have to be backed up by a credible study, detailing what the actual direct costs of new development are now. Not the routine,day in and day out, cost of running the city. Such studies are done from time to time in the faster-growing burbs. I don't know if Toronto has done such a study recently.

 

[AlvinofDiaspar]

Obs. Walt:

One can argue the reason why the charges are so low here in Toronto is because of the fact that there is already pre-existing infrastructure. Even if it is legally possible (which it isnt) there is really no justification for a 200% increase in the charges - and quite frankly it isn't really fair to new buyers. That's on top of the issue of dev. charges as a sustainable source of revenue.

I am actually more open to the idea of a partial selling of say Hydro to some REIT and apply it to the debt and reduce the impact of interests on the operating budget. That said, no one has provided any numbers as to how effective that kind of an arrangement is.

AoD

 

[Glen]

AoD,

Of course there are limitations. The qualifications that you listed are full of loop holes. Besides, the question is not how can Toronto justify raising its fees, but why are they not higher already. Look at the list of fees in the article. As the Sesame Street song says"one of these things doesn't belong here, one of these things is not the same". It appears more that what Toronto charges is not reflective of actual costs as of now.

On top of that, Toronto has the power under the CoTA to bypass the DCA by means of creating a new tax/fee outside of the DCA, whereby it does not need to be bound by such qualifications.

 

[Observer Walt]

Alvin, indeed the reason for lower development charges in Toronto is the (mainly) existing infrastructure. Toronto does not have to build major new streets, water systems, libraries, fire stations, etc. etc., as required in the greenfield areas of the outer burbs.

As for selling off things like Hydro, there is much to be said for that. In addition, I think there is a good deal of real estate that could be either redeveloped more intensively, or sold off. Having said that, government frequently doesn't have a good record at these things. Look at the questions quite recently around the hasty sale of street lights at what appears to be a bargain basement price. But that discussion does not directly relate to the issue of development charges.

 

[AlvinofDiaspar]

Glen:

Of course there are limitations. The qualifications that you listed are full of loop holes. Besides, the question is not how can Toronto justify raising its fees, but why are they not higher already. Look at the list of fees in the article. As the Sesame Street song says"one of these things doesn't belong here, one of these things is not the same". It appears more that what Toronto charges is not reflective of actual costs as of now.

Do you really fancy having a source of revenue in the budget that will have to endure court challenges and could very well be ruled illegal? You can explore it as an idea - but to think of it as the "solution" is probably highly unrealistic. In addition, if you read s5 of the DCA carefully, it isn't about the cost of delivering services - but the additional capital expenditure required as a result of the development- and that figure has to be justified. If you are suggesting the capital costs aren't reflective, shouldn't you provide evidence proving so?

On top of that, Toronto has the power under the CoTA to bypass the DCA by means of creating a new tax/fee outside of the DCA, whereby it does not need to be bound by such qualifications.

Where in the CoTA suggest that you can have a charge that overlaps development charges?

AoD

 

[GraphicMatt]

There's nothing saying that increased development charges would be passed directly to the consumer, especially if as I suspect developers are making healthy margins. If the market would support a $24,000 increase to prices across across the board, wouldn't prices already be that high?

Oakville Mayor Rob Burton talked about this article on twitter today, crowing about how Oakville has the highest development fees in the GTA and it hasn't slowed development down.

 

[Glen]

Glen:



Do you really fancy having a source of revenue in the budget that will have to endure court challenges and could very well be ruled illegal? You can explore it as an idea - but to think of it as the "solution" is probably highly unrealistic. In addition, if you read s5 of the DCA carefully, it isn't about the cost of delivering services - but the additional capital expenditure required as a result of the development- and that figure has to be justified. If you are suggesting the capital costs aren't reflective, shouldn't you provide evidence proving so?

Yes I know that the fees are only for capital costs. Regardless, It would be instructive to have a detailed comparison of cost's between municipalities.

Where in the CoTA suggest that you can have a charge that overlaps development charges?

Sub-section 267(1) could be used to apply a direct tax on the fees. Add a 180% tax on the development fees.