Toronto considering doubling development charges

[fedplanner]

http://www.thestar.com/business/2013..._projects.html

City of Toronto officials are proposing a doubling of development charges on new condo and housing projects across the 416 region, a move that is sending shock waves through the already precarious condo industry.

The suggested fee hikes — a year earlier and far beyond anything expected by condo developers already spooked by slumping sales and prices — could see development charges on a one-bedroom condo jump from $8,356 to $17,351.

Those charges, which builders say they’ve been told could kick in as early as May 1, are usually passed on to buyers.

All the new development puts huge strains on infrastructure. Expansion of existing infrastructure to cope with the new demands is expensive but has to be done. It's equitable for these costs be burdened by those who are adding than the infrastructure through the assessment of higher development fees. Hopefully this new funding will go towards projects like the Downtown Relief Line and other critical infrastructure improvements.

[DtTO]

That is unbelievably ridiculous and short sighted. Why don't we instead start by lowering city Councillor pay/compensation, which is a 3 digit salary as of now.

[RC8]

What a ridiculous idea. Yay, let's raise prices in the city while we continue to massively subsidise the suburbs.

[DtTO]

What a ridiculous idea. Yay, let's raise prices in the city while we continue to massively subsidise the suburbs.

Exactly. I believe taal pointed out in another thread that we have the highest suburb/city commercial tax rate discrepancy in North America. Instead of discouraging businesses and people from moving into the city, we should be encouraging them. We need to demand that the federal and provincial governments do more to support the country's largest economic centre. It's in the best interest of all Canadians!

[doady]

What a ridiculous idea. Yay, let's raise prices in the city while we continue to massively subsidise the suburbs.

The City of Toronto subsidizes residiential development in the 905?

[nfitz]

What a ridiculous idea. Yay, let's raise prices in the city while we continue to massively subsidise the suburbs.

Won't the revised development charges for Toronto still be lower than parts of 905?

Seems an excellent idea to me. Surely Toronto's development charges should be similar to 905 ... if not higher?

The market certainly doesn't seem to be suffering from the existing development charges.

[taal]

Yep Toronto's development charges are actually lower and still will be after this.

DtTO, this change is only going to impact residential from what I recall so its not much of an issue in terms of commercial.

Speaking of which though, the development charges on 905 commercial properties are similarly much higher then Toronto. Unfortunately for developers and future landlords, commercial property tax rates are much more significant and impact to the gross rental rate that can be charged. What I mean by this is nearly all tenants pay the property tax themselves not landlords (or landlords charge them is a better way to put it). So for developments near the edge of Toronto, they generally have lower gross rental rates (i.e. pre tax / operating expenses [which are similar throughout for similar quality buildings]), this lowers the net rate in Toronto is to make up for the higher taxes in Toronto and make the space more competitive. Actually this is why the vacancy rate in the outer 416 isn't terrible (its bad for the GTA, but sits around 10-15% depending on the area).

This actually brings up a good question once asked, if landlords already need to charge less to make the net rental rates (i.e. all in) similar to the 905, why do tenants care location wise ?

The answer is its not the tenants, rather the landlords (i.e. it makes less sense to build new developments in Toronto), and the a major reason that causes firms relocate out of the 416 (not in the core) isn't due to rents alone, rather due to newer higher quality office space being available in the 905 (which generally are more environmental friendly have lower operating costs). Also, after the decade or so this is happened, Hi-way 7 (for example) is in many ways more attractive then say Consumers road in Toronto, there is a much larger cluster of offices in the area / more amenities for the tenants in the area ...


Anyway back on topic, I don't think increasing development changes will have a significant impact (again assuming this is only residential, which I'm fairly sure is the case)

[Automation Gallery]

I don't think increasing development changes will have a significant impact (again assuming this is only residential, which I'm fairly sure is the case)

Im OK with that, as long as they put it back into expanding the existing infrastructure, DRL, etc....
hopefully the city plays it smart, and gradually increases development fees throughout a certain period of time, and not in one shot.

[Glen]

At present, development fees do not nearly cover the hard cost's associated with development. This means that every new development is subsidized by the existing tax base, and heavily so. Doubling of fees will still not cover the actual costs, let alone supply a surplus to fund a DRL.

[Admiral Beez]

The City of Toronto subsidizes residiential development in the 905?

Perhaps he meant Toronto's suburbs, i.e. Etobicoke, Sca'hbro, etc.

[js97]

It's easy to raise development fees, harder to actually ensure the money goes to infrastructure spending, instead of city slush fund.

[fedplanner]

The funding to expand infrastructure to support all this new development has to come from somewhere. Infrastructure is not just transit. Think parks, roads, potable water lines, sewers... the list goes on. IIRC, Toronto's sewer line also handles stromwater drainage, and the condo boom has not resulted in a need to expand sewer capacity due to the larger pipes. Potable water, transit and parks to a lesser extend all will need infrastructure dollars. (I don't include road expansion because every successful city will have a traffic problem and building additional roads will only encourage more people to drive. Although many, especially where I live, would take significant issue with that statement. Of course they all drive.)

Impact fees, what Toronto is calling development charges, is one way to do it. These fees will simply be passed on to the consumer. An alternative is to have another level of government pay for the expansion, which isn't happen. What is currently happening is that the city is subsidizing infrastructure expansions through property taxes. Also, infrastructure improvements are probably being delayed until they are absolutely necessary.

The best practices that I've seen is in Montgomery County, Maryland. They have high impact fees for new development that pay for infrastructure improvements in the county - I believe most of it goes towards new school construction. This fee applies to all new development except units geared toward affordable and workforce housing. That keeps it affordable so the costs aren't passed on to those that can least afford it.

[Glen]

Toronto's sewer line also handles stromwater drainage, and the condo boom has not resulted in a need to expand sewer capacity due to the larger pipes.

You should refrain as posting opinion as fact.

http://www1.toronto.ca/static_files/..._water_cap.pdf

Growth projects represent approximately 8% or $591.906 million ($247.422 million over
the first five years) of total recommended funding in the 10-Year Recommended Capital
Plan.
 Funding for anticipated growth projects such as new and enhanced watermains and
service connections are consistent over the 10-Year Capital Plan period, averaging
$59.2 million per year, however funding for planned significant stand alone projects
will vary from year to year based on growth requirements.
 During the first 5 years of the 2012 – 2021 Recommended Capital Plan period,
annual funding for growth projects range from $46.729 million in 2013 to $51.705
million in 2016.

[Glen]

http://www.toronto.ca/legdocs/mmis/2...file-50536.pdf

By way of example, out of the approximately $3 billion in gross capital costs for Toronto
Water projects supporting growth included in the City's 2008 Development Charges
Background Study, only 7%, or approximately $180 million, was planned to be recovered
from development charges over the 10 year planning period, compared to $358 million
eligible for DC funding over the same period. Funding for the balance is provided
through other sources which, for Toronto Water are primarily the water rates. Toronto
Water's 2012 to 2021 Capital Plan includes DC recoverable projects with a gross cost of
$2.24 billion, and based on the policies contained within the existing Development
Charges By-Law, shows a DC recoverable cost of only 4.25%. One of the options to
increase development charges funding for growth related projects is if Council reduces
the level of exemptions and discounts.

[fedplanner]

I stand corrected. To be fair, you omitted my preface: IIRC (If I recall correctly...)

You should refrain as posting opinion as fact.

http://www1.toronto.ca/static_files/..._water_cap.pdf

Growth projects represent approximately 8% or $591.906 million ($247.422 million over
the first five years) of total recommended funding in the 10-Year Recommended Capital
Plan.
 Funding for anticipated growth projects such as new and enhanced watermains and
service connections are consistent over the 10-Year Capital Plan period, averaging
$59.2 million per year, however funding for planned significant stand alone projects
will vary from year to year based on growth requirements.
 During the first 5 years of the 2012 – 2021 Recommended Capital Plan period,
annual funding for growth projects range from $46.729 million in 2013 to $51.705
million in 2016.