Development Charges

City Council is faced with a difficult decision with respect to development charge increases that may have a tremendous impact on outlying areas such as Valley East and Capreol.

Many of the residential developers are obviously opposed to any increase in development charges because they pass those charges on to the new home buyer and it costs more to purchase a new house. The money from the development charges is used to pay for capital costs associated with the new development, including libraries, waste treatment plants, transit, and sewer and water lines.

If approved by council, DCs on new single-family and semi-detached houses will go up to $17,163 per unit in areas with water and wastewater. Current charges are about $15,000.

Some developers have stated that new home sales are down because of the fact that our City charges development fees. Others state that the slowing down of house sales has nothing to do with development charges and more to do with our stagnant economy. People can afford new houses if they could get jobs that pay enough to cover the mortgages.

One comment was that people will purchase less expensive houses in West Nipissing or Sturgeon Falls and then drive to work in Sudbury for their day jobs. Mathematically it would not make much sense to pay an additional $400 per month in gas and vehicle maintenance plus give up 40 hours of time through travel each month in order to save the development charge on a house. Nobody is going to spend $4800 a year and give up the equivalent of a 40 hour work week per month to save a total of $2100 in development charges spread out over a 25 year term. Their time is worth much more than 20 cents an hour.

Despite the fact that the addition of development charges should not deter people from purchasing a new home in the Greater Sudbury Area, the whole issue of development charges may need to be given a second look. Apparently, one of the things that is holding up the construction of the new mall across from Carol Richard Park is the development charges that the City is imposing on the developer. Developers have always been required to for all of the infrastructure on their property, so once the water and sewer is hooked up from th...e City lines, everything else is paid for by the developer.

However, upon careful examination, it appears as if the development charges are a form of "franchise fee" or "tax levy" being imposed upon a developer in order to build in our City. It is kind of like a surcharge to pay for things like increased police and fire protection, and a number of other costs that are associated with municipal services. However, those extra expenses will be paid for through property taxes that are charged to the new homeowners or tenants on an on-going basis. Therefore there needs to be a good examination of what these development charges are actually funding.

If this is simply a way that the City is applying an extra tax to new developments, then it may be time to stop this practice to encourage development and avoid prejudicial treatment of new residents. The Mall developer in Val Caron should not be forced to pay an extra $250,000 to put in a collector pond that is not on his property in addition to very high development charges for his buildings on top of the $1 million he has to pay for traffic lights, curbs along the front of his property, and other upgrades. This is causing much of the delay in construction and does need to be looked at again if that is the case. Transferring the cost of development charges is forcing developers to increase the selling price and lease charges to a level that is not viable for a lot of tenants.

What I think is happening is that in order to deal with the drainage issues in the area where the new mall is to be developed, the City is going to be constructing some sort of underground pond to hold excess water (that may be simplifying the matter). But this is not just related to the property where the mall is going to be built, but also to take care of issues with respect to a housing development that may end up being done behind the Mall and along that whole area. It is not just to benefit the Mall.

I understand that this retaining pond is something that may have been needed for a while but with the new development proposal the City decided to add it to the list of requirements. The same holds true for the traffic lights since the road coming from the mall will also connect to a housing development that is going up behind the Jehovah's Witness property. In any event, some of these extra costs are one thing, but the other is that the per unit or per house development charges are over and above what a person would normally need to pay to build the development and infrastructure.

It appears to be an extra levy on new developments in order to generate money to pay for general funding purposes that may or may not have anything to do with the area around the property. Some of the development charges for the mall may be used to pay for some improvements in another part of the City. If that is the case then it is an unfair tax being imposed on one particular segment of our population to benefit the rest and it may be delaying construction somewhat. For example, before the mall developer across from Carol Richard Park can even begin to construct stores in order to generate rental income, he needs to have about $2 million on hand to deal with the requirements imposed by the City on top of his infrastructure and construction costs. That is a lot of money to have to put up before building. This does need to be looked at more closely.

WHOLE ISSUE OF DEVELOPMENT CHARGES WILL NEED TO BE RE-EXAMINED

If you look at the 2013 Report to City Council, and scroll down to the charts that give you an accounting of where the development charges were spent, you will see that the development charges collected from the Valley for example, go into a reserve fund and are drawn out to pay for all kinds of "growth related" projects from the Walden Ski Hill to the widening of the Ski Hill to the expansion of ambulance garages.

http://www.greatersudbury.ca/.../2013TreasurerReport(1).pdf

So the development charges have become a way of imposing a "levy" upon developers in order to grant them a permit to build new houses, apartments and commercial structures. It is almost like extortion. If you don't pay the development charges you can't build. The funds are then used to pay for projects that the City has entered into and in many cases projects that are dependant on future development charges to cover their costs.

They have absolutely nothing to do with the costs associated with the new development. They are instead covering additional costs of other projects already underway to allow the growth of the city that has already taken place. Those costs are shared by all of the ratepayers, but the people buying a new house must not only pay their share of the taxes, they also pay a "development charge" on top of their purchase since most developers pass that cost on to the buyer.

This is why a lot of development has slowed down in Sudbury and in particular the Valley. The big problem is that if the development grinds to a stop, then the City will not raise the anticipated total of development funds during the year and the projected funding for many projects will not be there. It also means that property taxes will not be collected from the undeveloped property. It then will have to come from other reserves. It has gone on for so long that it is almost impossible to put a stop to it without facing some significant financial repercussions. But it is slowing down the development in our area.

The following link will take you to a 178 page presentation that was made to City Council on April 17, 2014 with an explanation of the Development Charges that are being proposed and how the funds are being allocated. If you try to read it you will see why I am a supporter of full-time Councillors.

http://www.greatersudbury.ca/.../2014%20Development...

On Page 149, you will see that the projected cost, according to the City, of the Maley Drive Extension project is over $125 million. They expect to receive $83 million in grants and subsidies, although the province and federal governments are only expected to come up with $53 million. The Net Municipal share of this cost is set at $41 million. But between 2009 and 2023, they expect to direct $9 million of this from general taxes and $33 million from development charges.

So in reality, we don't even have the money set aside yet. We are planning on diverting $32 million of the development charges collected between now and 2023 towards the cost of this project, but even with that, we have set aside some $18 million of this against development charges collected after 2023.

If you look at page 156, you will see that our total projected costs for roads and related projects is estimated at $385 million. Out of that the municipality is expecting to receive $200 million in grants and subsidies and will have to come up with $185 million on our own. Out of the $185 million, the city staff have calculated that a total of $117,000 is eligible to be generated through development charges, with $51 million being raised from now until 2023, $20 million being taken out of previously raised development charges collected from other development in the city, and $46 million being raised after 2023.

If you remove the Maley Drive project, look at what it does to the calculations.

Our total projected cost for roads and related projects drops to $260 million.

Our municipality will be expected to receive a total of $117 million in grants and subsidies.

Our municipal share of these projects will be $143 million.

Development charges will only raise a total of $85 million

And we will only be required to raise a total of $38 million from now until 2023 and $28 million after 2023.

This would have a significant impact on the development charges that must be applied to new growth projects over the next ten years and might stimulate growth.

SYSTEMIC PROBLEM THAT WILL BE DIFFICULT TO CORRECT

The problem is that if we base our decisions on new projects from what is contained in this report, we could be getting ourselves into some projects while counting on future development charges that may or may not be obtained if our developers decide to hold off on development.

We have also commited a tremendous amount of future development charges to projects that will be post 2023.

I think anyone running for Council should read this report very carefully in order to be prepared for the kind of statistical nightmare that will be presented to them should they be elected. I know it has enlightened me a lot. I wonder how many of our current councillors have read this report from cover to cover?

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