New provincial rules for development charges could cost the city millions: Toronto officials

Thestar.com
December 20, 2019
Jennifer Pagliaro

New provincial rules for what cities can charge developers that kick in Jan. 1 contain legal loopholes that could cost the city millions of dollars, Toronto officials say.

To try to prevent some of the potential problems introduced with the province’s sweeping Bill 108 legislation, Toronto’s city council on Wednesday approved measures the city’s chief planner Gregg Lintern described as a financial “bridge.”

A motion moved at council Wednesday by Mayor John Tory’s affordable housing advocate Coun. Ana Bailao (Ward 9 Davenport) asks the province to delay proclamation of changes to the development charges rules until January 2021 to give the city and province more time to work out any issues.

“Development charges ensure that needed infrastructure to support new developments are costs assumed by developers,” Bailao said in a statement. “Development must pay for development. On January 1st, 2020 the province will bring into force further provisions of Bill 108 dealing with development charges that could potentially create loopholes costing city taxpayers millions of dollars. We need to ensure that before any legislation comes into effect, we close any of these loopholes and protect the City and its taxpayers from having to bear these costs.”

On Thursday, in a letter to heads of council obtained by the Star, Municipal Affairs and Housing Minister Steve Clark said they would be going ahead with the changes to development charges as planned on Jan. 1 and reiterated that Bill 108 is meant to help speed up the creation of new housing amid a continuing crisis.

The bill, introduced earlier this year, is called the More Homes, More Choice Act. It amends 13 separate pieces of existing legislation, including the Planning Act and the Development Charges Act.

Municipal critics have said the need to build more housing shouldn’t and doesn’t need to come at the expense of building livable neighbourhoods.

Development charges are one of several tools cities have to ensure the principle is met that “growth pays for growth.” They are fees charged to developers to help pay the capital costs of roads, sewers, libraries and other infrastructure.

Bill 108 changed the timing of when development charges are due, from when building permits are issued to when the developer first makes a development application, which is much earlier in the process. The rate will also be frozen for two years after planning approvals are received.The rate will also be frozen for two years after planning approvals are received.

That, city staff said in a May report to council, could have “significant financial implications” for the city with developers avoiding rate increases by locking-in a rate earlier.

The new legislation also allows developers to defer full payment for several years on certain types of applications, such as for rental housing.

Deferred payment, the city staff report said, is “effectively an unsecured loan from municipalities to developers with potential municipal exposure to collection administration and risk.”

In his letter, the minister said the government has been consulting with municipalities and values their input.

“We recognize that municipalities may incur some additional costs as a result of these requirements, and, for that reason, the legislation provides authority for municipalities to charge interest to cover costs associated with the deferral and the freeze. In addition, a maximum interest rate will not be prescribed,” the letter says.

The motion approved by council Wednesday gave staff the authority, if the date of the new rules coming into force was not moved, to charge interest of 1.5 per cent per month for applications received on or after Jan. 1 with a goal of breaking even when compared to the old system.

It also asks staff to charge additional interest on applications where payment is deferred if the applicant doesn’t provide “satisfactory” financial security, such as a letter of credit.

“We understand where the province wants to get,” Bailao said. “We just need to make sure we work together on a process that gets us those results and avoids any unintended consequences. We will continue to work with the province on all aspects of this legislation to ensure growth is paying for growth and we are building great communities.”

Dave Wilkes, president and CEO of the Building Industry and Land Development Association, representing more than 1,500 industry members in the GTA, said they are aware of the motion and “consulting with legal council to determine its validity.”

“BILD and its membership are supportive of the spirit and intent of Bill 108. Freezing development charges at the time of the planning application allows for cost certainty and predictability for the end consumer when purchasing a new home or condo. This is entirely positive.”