Development Charge Difficult Decisions

Wayne MacDonald

Development Charges --  Implementation Options

One of the most difficult decisions a municipal council has to face is how to balance community needs with taxpayers' ability to pay.

Among those tough choices is when and how to implement Development Charges.

Development Charges are not new, nor is Saugeen Shores the first community to make those choices. Nor will it be the last.

Many communities across Ontario have Development Charges, especially those that have chosen, rightly or wrongly, the path of rapid growth.

A few years ago, C. N. Watson and Associates Ltd. of Mississauga, the consulting company that did the consulting work for Saugeen Shores, produced a research report entitled Development Charges Impact Policy Paper.

It says "the most difficult policy issues which municipalities have to deal with in establishing development charge policy relates to assessing the potential impact of development charges on the rate of development, and (more recently) on municipal planning initiatives."

There are, according to C. N. Watson, two opposing views:

1. "A comparatively low or reduced rate may reflect sound policy, if municipal service levels and servicing costs are lower and the municipality wishes to signal the market of its desire for increased residential, commercial and/or industrial development.

2. The second (and opposing) view is that a properly calculated DC rate does not tangibly inhibit growth and, if not implemented, the municipality is failing to utilize fully one of its limited capital funding options. As a result, the municipal tax levy and water/sewer rates are higher for existing ratepayers than necessary."

So, does Saugeen Shores really have a "no" Development Charge option?

Low or reduced rates signal a desire for continued growth, but that means current taxpayers are subsidizing some of that growth.

Choosing the second option means "growth pays for the growth", the original intention of provincial Development Charges legislation.

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A summary of the Watson report contained in a study from the Regional Municipality of Waterloo makes some comments about non-residential discounting (assuming, we suppose, that residential rates, for the most part, will not be discounted.)

  • Will the Development Charges affect the municipality's (Saugeen Shores) ability to attract industrial and commercial development?

  • How effective are Development Charges as a tool in implementing the municipality's planning objectives (affordable housing, downtown revitalization, 'brownfield' industrial)?

  • No definitive answers apply in every situation. These charges comprise only one of a complex set of factors which promote or discourage development.

  •  The challenge is to balance the need to be competitive with the cost impact to ratepayers.

The Waterloo Region report highlighted what it considers a priority list in a business choosing a location:

1. Quality of life

2. Availability of skilled professionals

3. Proximity to markets

4. Availability of skilled labor

5. Low business cost

6. Access to high education

7. Climate\

8. Taxes

"Development Charges, where they may be consideration at all, are likely to be well down the list. In part, this is for economic reasons. Development Charges are one cost out of many in the establishment of a business. When amortized over the useful life of the facility, the incremental cost of development is quite low, even at rates that first appear to be substantial.

And it could be worse.

Saugeen Shores seems headed toward a $4,000 per unit residential Development Charge, down from $8,000 in Year One.

Fast-growing Innisfil Township just recently upped it rate to more than $30,000.

Wayne MacDonald January 18, 2008

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