Focus on transit, openness: Development Charges Act revisions win praise

NRU
March 18, 2015
By Edward LaRusic

Proposed changes to the Development Charges Act are expected to improve how municipalities plan and pay for transit and, in the process, add transparency for developers, say experts.

Their comments come in response to Ontario’s Bill 73, the “Smart Growth for Our Communities Act, 2015,” which proposes changes to two major pieces of provincial legislation: the Planning Act and the Development Charges Act. While the Planning Act revisions have drawn mixed reviews to date (see the March 11 edition of NRU), proposed amendments to the Development Charges Act are winning generally favorable reviews.

Among those positive about the proposed changes is municipal finance expert Craig Binning (Hemson Consulting Ltd.), citing the government’s move to end the requirement that municipalities apply a 10 per cent reduction on transit service capital costs when determining its development charges. In effect, municipalities would be able to recoup the full amount of what they estimate they need from a new development to pay for transit-related capital costs.

“[The proposed changes are] recognizing that transit is an important topic with respect to the planning objectives of the province and that the funding has been a challenge,” said Binning.

“Under the current act, it’s difficult to appropriately and adequately fund transit related needs associated with development. The movement for removing the 10 per cent discount is important just from a pure funding [perspective] but it also allows us to examine the service differently in terms of its importance.”

If approved, transit services would join water, waste water, and electrical power services in not being subject to the 10 per cent reduction.

Solicitor Paul De Melo (Kagan Shastri LLP) said elimination of the discount on transit would work well with another amendment designed to help municipalities improve how they plan for future services.

Under current provincial rules on new developments, municipalities cannot increase development charges to pay for a particular service beyond the average level of a particular local service over the previous 10 years. That restriction, say experts, makes it difficult for municipalities to plan for new infrastructure especially when a service such as transit does not exist yet.

If the province’s revised wording is approved, the government would regulate “prescribed services” so that municipalities could plan ahead 10 years to determine the likely need for a prescribed service, such as transit. As a result, municipalities would have greater capacity than at present to collect development charges to fund the planned level of service.

De Melo said the proposed change could be very significant, but noted that the definition of what is a prescribed service remains to be determined by a Development Charges Working Group that will be established following the passage of Bill 73. The provincial government would expect a report back by the end of 2015.

“I would hope that one would see something along the lines that they’ve done with transit: that you’re dealing with the planned level of service going forward… That represents, in my view, a significant change from how the [Development Charges Act] operates,” De Melo said.

One critic of the move to give municipalities more scope than before to fund transit service through development charges is Ryerson University professor David Amborski.

“Development charges are pretty high already. I know [municipalities are] looking for transit funding, but I’d rather see some other tool that captures land value directly around the locations that would increase in land value due to transit and transit stations rather than an across-the-board development charge. I can’t see people who don’t benefit paying for it,” said Amborski. “I’m more in favour of other land value capture tools, more area specific tools.”

Solicitor Lynda Townsend (WeirFoulds LLP) agreed with Amborski.

“I’m a firm believer that we need new money for transit, but I’m also a firm believer that you can’t put it all on the backs of the new homebuyers,” she said.

Meanwhile, another key change to the act aims to add transparency and accountability to the development charge process.

Currently, the act requires each municipality - through a municipal treasury statement - to provide an annual report on its development charges by-law and to set aside funds generated by development charges.

Under the proposed revisions, municipalities would have to identify which of its infrastructure assets are funded through development charges. Ass well, municipalities would be prohibited in future from charging for so-called “voluntary payments” - services not related to those outlined in the Development Charges Act.

At present, said Townsend, many municipal treasury statements are either not done or poorly prepared, making it hard for a developer to know if the development charge revenue is being used for the stated purpose. Increased transparency, said Townsend, would benefit municipalities and developers.

“[These amendments would add] more transparency for the development community to see what their money has been spent on it and what they thought their money would be spent on in a background study. That makes it so much easier to then, on the municipality’s side, justify future needs. From my perspective, the more open you are with what you’ve spent it on the easier it is to go into the next round and justify additional collections.”

Townsend added that curbing of “voluntary payments” would also help ensure clarity in the Development Charges Act about legitimate contributions by developers.

“On occasion a municipality will say ‘it’s very difficult for us to fund infrastructure,’” said Townsend. “What the municipality will do is look to the developers and say ‘we don’t have other sources of money, so please give us these voluntary payments,’ and some developers have had an issue with voluntary payments and pushed back.”

Significantly, Townsend noted, the provincial government would have added power in future to investigate claims that charges were being levied outside the scope of the act.

“That’s new, that’s different. What that says to me is the government is looking at the Development Charges Act as a complete code, and you have to operate within the code.”