Vaughan values section 37: FORMULA APPROACH

NRU
Feb. 25, 2015
Edward LaRusic

The City of Vaughan is moving forward with a new formula-based approach for section 37 contributions that it hopes will be transparent, consistent and become a best practice in Ontario.

Planning commissioner John MacKenzie told NRU that staff wanted to have a frame of reference that could be used to determine what may be a reasonable dollar value for section 37 contributions.

“When we get into [the section 37] process, very quickly, councillors, the public, our own staff internally in the different departments are asking us ‘what type of dollar value are we looking at here? What are we looking at in terms of potential section 37 benefi ts?’” said MacKenzie.

To help answer that question, Vaughan staff has created guidelines for the implementation of section 37, which include a formula for determining the uplift in value that a proposed development may gain by allowing higher density on a particular site. (See sidebar.) Key to this formula is the use of a Land Value Matrix, which places a per square foot dollar value on development in a particular location in Vaughan. The matrix, created in part by GSI Real Estate Planning Advisors Inc., is based on current land values in a particular location and will be updated yearly.

“[The formula] will serve as a frame of reference to kick start the negotiations. [Staff] didn’t want a “let’s guess, let’s throw pull some numbers out the sky” approach. It wanted to have a number grounded in the actual real estate trades that have been taking place in the city.”

MacKenzie said that the formula won’t completely remove the negotiation that goes on between staff, the applicant and the local councillor. The formula allows staff to have some latitude—between 20 and 35 per cent of the increase in land value—in determining the size of section 37 contributions needed for an area.

“In some areas, such as Thornhill Centre, you have an area that has community services in place. You have nearby facilities and amenities. You have a pretty good level of service based on the historical level of development in that area… In that kind of area, we might look at the lower part of the range,” said MacKenzie. “In a brand new area where we don’t have that infrastructure in place, we might try and get a higher percentage on that range in order to help off set that.”

Part of the drive behind this range, said MacKenzie, is filling in some of the gap that results from development charges. He noted that Vaughan is trying to intensify, but the Development
Charges Act sets charges based on a 10-year historical benefit, which limits what Vaughan can charge.

“With development charges, you can only collect based on that historical level of service. The historical level of service in the City of Vaughan has been for traditional low-density subdivisions built on greenfields. Now we’re in a position where we’re trying to fund infrastructure in these intensified environments. We’re trying to deliver what the development community and what everyone seems to want. We’re looking at [this formula] as a potential means of helping a little bit on that.”

MacKenzie noted that the goal is to create a transparent framework.

“We are trying to do things such that the community understands how we’re valuing this. We don’t want to be doing things that people can’t figure out. What we’re doing here with this framework is making sure there is a transparent, reproducible approach that reflects the best practice out there.
We’ve hopefully positioned Vaughan as a leader of this in Ontario.”

Should a developer have concerns with the values within the Land Value Matrix, it can request the city to commission up-to-two appraisal reports—at the developer’s expense— to examine the value on a site-specific basis. Failing that, MacKenzie notes that the developer can appeal its section 37 contribution to the Ontario Municipal Board as usual.

The new formula-based approach is drawing some mixed reaction from the development industry.

BILD York Chapter chair and Metrus Developments vice president Michael Pozzebon said in an email to NRU that Vaughan consulted with BILD early in the process. BILD likes “Vaughan’s approach at trying to address consistency in section 37 requirements across development projects” and “[t]he approach of applying section 37 in a fair, transparent, predictable and relevant way.”

SmartCentres land development director Paula Bustard raised some concerns at the February 3 Committee of the Whole meeting regarding the new guidelines. She said that her organization’s concerns were focused on two main items: the percentages used to determine the section 37 contribution and the land value matrix.

“One is the range of 20 to 35 per cent for the [maximum section 37 contribution]. We feel that there has not been enough justification for that range… That’s a very, very high percentage. Specifically, the [February 3 staff report] also speaks to the higher end being applied to the Vaughan Metropolitan Centre. The Vaughan Metropolitan Centre has huge transportation infrastructure [coming]… to not encourage density in that location seems counter-intuitive to me,” said Bustard.

“My second concern is with the land value matrix. From an implementation process it’s going to be flawed. Having homogeneous zones within Vaughan with the same land value is never going to be applicable. I think pretty much every instance of section 37 is going to trigger an appraisal,” Bustard said.

That appraisal, she noted, is commissioned by the city and does not involve input from a landowner, other than a meeting.

“Our preference is to have a mechanism to allow a landowner to complete their own independent appraisal. If there needs to be a peer review of that, that’s something that can be considered. But reports and appraisals are only as good as the information being provided and nobody knows the land and its unique characteristics more than the landowner.”

Ward 4 councillor Sandra Yeung Racco told NRU she disagreed with Bustard. She said the city has only so many tax dollars and areas of her ward, which include the Vaughan Metropolitan Centre, need section 37 if Vaughan is to become the vibrant city it is aiming to be.

“There’s only so many dollars… we need these tools to make our city, our downtown more urbanized. And building in an urbanized area is very different from building a greenfield, low-rise residential [development]. There are other services that we might need to enhance the area. This is a way we can, in a fair and transparent way, get some of these monies to be put back into the community, to enhance the community and the area.”

Council approved the guidelines, including the section 37 formula, at its February 3 Committee of the Whole meeting.

SIDEBAR
Vaughan section 37 formula
Vaughan’s section 37 formula is intended to estimate the increase in land value that would result from an increase in density and thus assist staff in determining the upset limit for section 37 contributions.

(proposed density – permitted base density) x (lot area) x (land value matrix value) = increase in land value

The permitted base density will be generally found in either the Vaughan official plan, or a prevailing secondary plan. Once subtracted from the proposed density, that number is multiplied by the lot area to determine the increase in buildable ground-floor area above and beyond what is allowed under the base density. The result is then multiplied by a predetermined land value (price per square foot) for the development site, which may be found in the city’s Land Value Matrix. The result is the increase in land value that the proposed development would gain were it to be approved.

(increase in land value) x (20 to 35 per cent) = maximum upset limit for section 37 contributions

Between 20 and 35 per cent of that increase in value is established as the maximum upset limit for section 37 contributions. The specific percentage is based on staff’s determination of the local community’s need for public amenities.