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City development charges increasing July 1

Council declines request from developers for a phase-in period

By Dave Flaherty/The Oshawa Express

Beginning July 1, developers will be forking over more for their projects.

City council approved a new development charge bylaw which takes effect next month.

Development charges are fees covering costs related to growth.

Under the new bylaw, the majority of charges will increase.

Charges for single and semi-detached units will jump from $17,642 to $24,250, a 37.5 per cent increase.

For duplexes and apartments with two or more bedrooms, charges will increase by 20 per cent, while bachelor and one-bedroom charges will rise 35 per cent.

The development fees for a townhouse dwelling will jump 44 per cent, while lodging dwellings will see a 50 per cent increase.

On the non-residential side, commercial and institutional charges are up 35 per cent.

Industrial development charges will actually decrease by 41 per cent.

Council had options to put the increases in place immediately, or phase in over a one to five-year period.

The request for the phase-in came from the Durham Region Home Builders Association.

But city finance staff believe collecting over a longer period of time would result in millions of dollars in deferred revenue, which may need to be made up through tax increases.

A motion to install the fees increases immediately on July 1 passed by a six to four vote.

Councillors John Gray, Jane Hurst, Rick Kerr, Rosemary McConkey, Derek Giberson, and Brian Nicholson were in favour. Opposed were councillors Bob Chapman, Tito-Dante Marimpietri, Bradley Marks and Mayor Dan Carter.

Carter favoured spreading the new charges over a transitional period.

He explains the city has built a strong relationship with developers to assist them in bringing quality projects to the municipality.

To Marimpeitri, phasing in over a three-year period would be an appropriate “middle ground” approach.

He pointed out the city had already increased development charges by 200 per cent five years ago.

“It’s not like we are leaving money on the table,” he said.

With the increase, Oshawa has the second highest development charges in the region.

But Gray said the city had some of the lowest fees in Durham for many years.

“We are getting where we should in terms of our neighbours,” he said.

He couldn’t support any tax increases to make up the foregone revenue.

“The responsible thing for us to do is not to defer,” Gray said.

Nicholson entertained a transition period but was unhappy a potential burden on taxpayers.

He estimated only about 10 per cent of developers building in Oshawa actually live in the city.

“Why would I ask the Oshawa taxpayer to pay more in order to give a benefit to those who are not from Oshawa, and how would I justify that?” he asked. “I don’t think our taxpayers can give anymore.”
Marimpietri argued Nicholson viewpoint “minimizes” the number of city residents employed by the developers, as well as ancillary businesses such as suppliers.

While the revenue is important to the city, he said the role developers play is as valuable.

“To raise development charges just because we can is arrogant,” he said.

Council also approved a background study prepared with the new bylaw.

Andrew Grunda of consultant Watson and Associates told councillors new provincial legislation is changing the way municipalities can collect and distribute development charges.

Under Bill 108, the More Homes, More Choice Act, Grunda said municipalities are “very limited” on the types of services revenue from development charges can go towards.

The province will allow municipalities to work with developers to create “community benefit funds” to cover other services.

But Grunda said the land value would provide the base for the funds, instead of the number of units.

He also explained it is unclear how much these funds would bring to a municipality.

Nicholson said the province is providing municipalities with inadequate information.

“With the unforeseen hammer that is about to land on us that they don’t seem to want to talk about, I don’t see good news coming down for the municipalities,” he said. “If it was something that would be good for the industry and the municipality, they’d be on the steps of the Legislature talking about it.”

Tiago Do Cuoto, a director with the Durham Region Home Builders Association, said the increases are putting a squeeze on developers.

Do Cuoto said the housing market is struggling as sales are down.

“We’re asking for some time for the industry and the market to adjust to these increases,” he said.

Nicholson said many developers had bought land years ago at lower prices, while the cost of housing has skyrocketed.

“How is this charge onerous when the revenue stream is 150 per cent higher than it was several years,” he asked Do Cuoto.

According to Do Cuoto, business costs have “gone through the roof.”

“It’s becoming harder for us to bring those units to the market, and provide those [development charges] to the municipality,” he said.

The association has already appealed development charges in Ajax and is waiting for a decision.

Council also directed staff to review a deferred payment program for development charges.

Oshawa already has such a program, but Do Cuoto notes most developers won’t use it because they have to post the full cost of a project as a security.

Nicholson said this provides the city some protection but adds development charges shouldn’t be front-end loaded.

“It’s like paying off your mortgage before closing on your house,” he said.