Post: Mayor freezes development fees for next year

[Mike in TO]

Hall Monitor: Mayor freezes development fees for next year

National Post

Professing himself "concerned" about the future of Toronto's venerable building industry in these uncertain economic times, Mayor David Miller yesterday announced the city will freeze development charges on projects for 2009.

The mayor's announcement preempted a report expected out soon that will recommend a doubling of development charges, which are charged mainly for new residential construction to fund infrastructure improvements among other things.

But that doesn't mean a hike in the fees won't be postponed for future years, officials warned, when the housing market stabilizes.

Toronto pulls in about $50 million a year in development charges. BILD – the Building Industry and Land Development Association – estimates that fees charged per unit in Toronto currently range from $5,000 to $11,000.
Stephen Dupuis, the CEO of BILD, said yesterday he was delighted by the news, but said it is more of a symbolic move since the bottom line won't change for projects already underway or scheduled to start.

However Mr. Dupuis explained how it would keep costs stable for both developers and buyers "The freeze for 2009, it actually works a couple of ways. For builders planning projects, right now they’ve been wondering ‘What number do I plug in there? I know what it is today,’ but there were rumours of some pretty dramatic increases. So now they have some certainty in terms of what they need to plug into the equation, which is always a good thing. The other things is had DCs gone up dramatically, in many cases those would have been passed right through to people that had already bought their condos, just through the sales agreements that they’ve signed. In some ways the impact would have been harder on people who had already bought."

 

[taal]

Good idea, bad?

Not sure, might help spur developments but can we really afford it!

I'd do it but only on office / commercial buildings.

 

[Glen]

IMO this manoeuvre makes no financial long term sense. The tax revenue that residential properties provide dose not cover the cost of the services provided. Subsidising money losing properties is stupid. The city should be doing what taal suggested, limiting it towards non residential development only.

Now some cynics might suggest that the real carrot for the city it the LTT which the city can use for a few short years to be revenue positive.

 

[Mike in TO]

City staff urge break on development fees

Some councillors object to staff's suggestion that higher fees be phased in based on market forces

Oct 24, 2008 04:30 AM
Comments on this story
John Spears
city hall bureau (Toronto Star)

Toronto should more than double the fees that developers pay to cover the cost of new city services, says a staff policy proposal – but the increase should be phased in according to the strength of the housing market.

Right-wing councillors were quick to call for more aggressive fees, arguing that homeowners will end up paying if developers get a break on the higher fees.

But a spokesperson for developers said the proposal to adjust fees according to the housing market is "enlightened."

Such fees, called development charges, are set every five years. Developers pay a set amount for each unit they build.

The charges are intended to cover the cost of growth: New developments mean the city has to expand roads, water lines, transit service, libraries and even emergency services.

The charges are paid by residential and retail developments – industrial and office properties are exempt.

Currently, home builders in Toronto pay $11,082 for each single-family home built; the proposal would increase that by 126 per cent, to $25,095.

For a one-bedroom apartment or condo, developers now pay $4,467; the new fees would boost that 144 per cent, to $10,920.

Toronto has raised $55 million annually from development charges in recent years.

Because of the stumbling economy, Mayor David Miller said last week that he wants to freeze development charges in 2010, then phase in new charges over four years, starting in 2011.

Yesterday, city staff proposed a further cushion.

In any given year, if fewer than 7,000 housing units had been built the previous year, there would be no development charge increase.

Less-than-maximum increases would be charged on a sliding scale, up to 9,000 units; activity above that level would trigger the full increase.

About 12,000 units are expected to be built this year, but city projections show a sharp drop in the future.

Councillor Norm Kelly (Ward 40, Scarborough-Agincourt), who chairs the planning committee, called the proposal "prudent."

Councillor Adam Vaughan, (Ward 20, Trinity-Spadina) said the city has to be sensitive to the economy.

In his downtown ward, developers have submitted one new proposal every day on average for the past two years, Vaughan said in an interview.

But that came to a shuddering halt this summer: "I haven't had a new development since July."

Stephen Dupuis, chief executive of the Building, Industry and Land Development Association, said the size of the proposed increase is eye-opening: "It's a pretty big number to digest."

But he welcomed the proposal to have the increases geared to market conditions.

"It's pretty clever, to tell you the truth," he said in an interview. " I think they're seeing themselves more as partners in prosperity on this one – that's quite a shift in thinking."

But right-wing councillors said the phase-in amounts to a subsidy for developers at the expense of homeowners, who will have to pick up the slack.

"It will cost taxpayers on the order of $40 million or $50 million in 2009, and that's completely unfair," said Councillor Cliff Jenkins (Ward 25, Don Valley West).

"Why should we single out one industry for subsidy?" wondered Jenkins, adding that city officials can't show how the city will benefit from giving developers a break: "They're flying by the seat of their pants."

Councillor Karen Stintz (Ward 16, Eglinton-Lawrence) said homeowners have absorbed a succession of tax and user-fee increases over the past five years and shouldn't have to absorb new breaks for developers.

"If you're going to make this break for the developers, what break are you going to make for the residents?" she asked.

 

[TrickyRicky]

It will be interesting seeing politicians flail around trying to act as if they are doing something on the economy over the next year. Don't worry Mr. Mayor construction and property purchase and sale activity will be dramatically curtailed over the next few years biting into the projected land transfer tax revenue projections and rendering this latest gesture next to useless.