Region of Waterloo Transit and Waste Management Development Charges

Transcription

1 REPORT TO: Committee of the Whole DATE OF MEETING: August 29, 2016 SUBMITTED BY: Rod Regier, Executive Director of Economic Development, (519) ext Ryan Hagey, Director of Financial Planning, (519) ext PREPARED BY: Rod Regier, Executive Director of Economic Development, (519) ext Ryan Hagey, Director of Financial Planning, (519) ext Brian Bennett, Manager of Business Development, (519) ext WARD (S) INVOLVED: All DATE OF REPORT: August 23, 2016 REPORT NO.: CAO SUBJECT: Region of Waterloo Transit and Waste Management Development Charges RECOMMENDATION: WHEREAS on June 27, 2014, the Regional Municipality of Waterloo enacted By-law respecting Regional Development Charges effective August 1, 2014, which was synchronized with the City of Kitchener Development Charges By-law to provide for a downtown core exemption and reduced manufacturing rate until 2019; and, WHEREAS the downtown core exemption was deemed necessary to incentivize development in this area while construction was proceeding on the Regional Light Rail Transit (LRT) and continues to be relevant given the challenges this construction has had on the current economic climate of the downtown; and, WHEREAS both the Region of Waterloo and City of Kitchener development charges for industrial development were discounted to encourage investment and employment in this sector; and, WHEREAS on August 9, 2016 the Region of Waterloo released a background study on a proposed Transit and Waste Diversion Development Charges, which outlines concerns with maintaining the existing downtown exemptions and sets out three options for applying the new charges; and, *** This information is available in accessible formats upon request. *** Please call or TTY for assistance

2 WHEREAS several developments are planned or underway in the downtown based on the established exemption and while in time the LRT is expected to result in premium pricing for station area projects, this has yet to come to fruition; and, WHEREAS changing the process by adding the unexpected fees related to transit and solid waste diversion could affect the financial viability of some of those projects and subsequently hinder growth; and, WHEREAS the proposed Transit and Waste Diversion Development Charges would result in a 17% increase to the rates applied to industrial investment, which would adversely impact the creation of new manufacturing jobs across Waterloo Region; and, WHEREAS Section 1(g) of Regional By-law defines Core Area as meaning an area designated as a downtown core area in Schedule D of said By-law, provided that a similar exemption for the downtown core area is applicable in the current development charge by-law of the applicable lower-tier municipality; and, WHEREAS notice was previously given that the downtown exemptions contained in the City of Kitchener s current Development Charges By-law would end as of February 28, 2019; and, WHEREAS the Region of Waterloo will be holding a statutory public meeting regarding the proposed Transit and Waste Diversion Development Charges on September 13, 2016; THEREFORE BE IT RESOLVED that the City of Kitchener encourages the Region of Waterloo to adopt Option 2 - Differentiated transit development charge, in which the larger public interest in improved transit is acknowledged and reflected in the development charge framework; BE IT FURTHER RESOLVED that the Region of Waterloo be requested to maintain the current Kitchener downtown exemption until February 28, 2019 as determined under Bylaw ; and, BE IT FURTHER RESOLVED that the Region of Waterloo be requested to maintain the current Regional Development Charges rate for industrial related investment; and, BE IT FINALLY RESOLVED that a copy of this motion be circulated to the Region of Waterloo as well as local area municipalities. BACKGROUND: In June, 2011, Regional Council approved the Regional Light Rail Transit (LRT) project and an annual tax rate increase of 0.7% per year for a total of 4.9% over 7 years to fund the Region s portion of the project s operating and capital costs. An additional 0.3% was allocated to fund capital and operating expenses related to improvements in general transit from 2012 to Regional Council also reallocated budget reductions from retirement of debt and uploading of

3 social assistance costs, valued at approximately 0.5% per year from for rapid transit operating and capital costs. At that same meeting, Regional Council directed staff to pursue a Regional Development Charge (RDC) legislative amendment in order to assist with funding the LRT project. In 2014, the City of Kitchener and the Region of Waterloo passed Development Charge bylaws that synchronized the downtown exemption and the 50% discount rate for greenfield industrial related development charges. The current by-laws provide certainty to developers until 2019, when a new development charge by-law will be established. In December 2015, amendments to the Development Charges Act (DCA) were approved by the Province through Bill 73 (and O.Reg 428/15) to allow for additional development charges (DCs) related to transit and solid waste diversion services that are delivered by the Region of Waterloo. In January 2016, Regional Council directed staff to prepare a Development Charges Background Study for Transit and Waste Diversion. On August 9, 2016 the Region of Waterloo released a background study and launched a consultation process on Transit and Waste Diversion Development Charges. The Administration and Finance Committee will consider recommendations of the RDC Steering Committee at a meeting in October. REPORT: The Background Study and Information Report (F27-50) recommend the adoption of an eligible Transit RDC of $161 million and Waste RDC of $8.7 million. The combined RDC would increase by between $3,611 and $3,935 per single detached house ($1,983-$2,162 for urban apartments) and by $1.09 and $1.70 per square foot (11%-17%) for non-residential development. The report identifies three options for implementation: immediately following the Regional Council decision, November 1, 2016 or January 1, The RDC report presents three alternative residential transit DC options for consideration. Option 1 limits the transit RDC to Cities with no additional DC for township development. Option 2 places a portion of the new RDC on townships - approximately 50% of the urban transit RDC. The third option distributes the RDC uniformly across the region. Option 1 will have the effect of creating an incentive for development outside the transit supported areas of the Waterloo Region, and could frustrate the implementation of the Growth Management Strategy. Option 3, could result in development charges placed on properties that do not benefit from the increased level of service. Option 2 is an appropriate compromise, in which the larger public interest in improved transit is acknowledged and reflected in the development charge framework. Downtown Core Exemption The current RDC includes wording (shown below) that matches any downtown core exemption from a lower-tier municipality. Kitchener has a 100% downtown core exemption for DCs in place until March 1, The Regional Report identifies a number of concerns with maintaining the downtown exemptions. It argues that: Any exemptions must be funded from the property tax levy;

4 Not applying the exemption shifts the responsibility of Transit and Waste funding from property tax levy to development; Extending the core area exemptions will put additional pressure on existing exemption funding sources; LRT/aBRT provides benefits to development occurring in core areas; and, Existing By-law includes downtown core exemptions for all services. The Regional report and background study do not identify any risks to eliminating the core area exemptions prior to 2019 or increasing the manufacturing development charge rate. City of Kitchener staff believe that there is considerable risk in imposing the proposed RDC in the downtown immediately or eliminating the existing RDC exemption prior to the agreed upon 2019 deadline. The core exemption was maintained until 2019 to account for the fact that LRT would be built, but until it was completed, there was still a need to incent development downtown. This need has not changed, and in fact, could be argued that it is even more necessary given the disruption being caused by LRT construction. Several downtown developments are planned or underway based on the current DC charges in place. Adding unexpected DC charges now could change the financial viability of some developments and hinder growth. The City of Kitchener determined that a reasonable notice period of one DC By-law was required to ensure stability as major projects went through the planning and development process. While current market conditions are supporting the reurbanization of downtown Kitchener, urban developers have significant hurdles to overcome in the development process. They are operating in a highly constrained environment, often dealing with contaminated sites and must provide structured parking for both residential and office projects. These factors, as well as escalating land values increase the cost of urban development over that of suburban greenfield development. In time, the LRT is expected to result in premium pricing for station area projects and shift the modal split in favour of transit commuters. But this transition will take time and the current downtown exemption is necessary to incentivise residential and office development in line with current Regional and City policy until that shift takes place after rapid transit is operationalized. Manufacturing Discounted Development Charges At present, both City and Region development charges for industrial development are discounted by 50% to encourage investment and employment in this important sector of the economy. While the Regional report has not proposed eliminating the 50% industrial discount, the imposition of a 17% increase in development charges to industrial investment could adversely affect the creation of new manufacturing jobs in the Waterloo Region. Manufacturing land uses are less intense and land values are lower than that of commercial or office use. As a result, less value is created in manufacturing development against which increased area development charges can be amortized. The result is that a uniform non-residential development charge

5 creates a disincentive for the type of export oriented employment that underpins the regional economy. Impact Immediate RDC implementation on Urban and Industrial Projects The immediate implementation of material increases in DCs has a disproportionate effect on medium to high density condo (res) and office development. These two forms of development, which we are relying on to achieve Kitchener and Region of Waterloo Growth Management and economic development objectives, have longer development cycles and are less price elastic than low density development. As significant new development charges can alter the economics of new development projects, consideration should be given to providing an adequate notice period or phasing in the implementation of a new development charge in order to allow developers and property owners time to adjust plans and pricing to accommodate the new charges. Funding Options As noted above, the Region has previously allocated increased and dedicated tax revenue to fund transit improvements including LRT. Presumably, the implementation of the Regional Transit DC will allow the Region to reduce that commitment. The continuation of the downtown exemption and reduced industrial DCs can be funded by moderating the reduction in the Regional transit levy afforded by the new RDC. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The proposed approach supports current planning policy for reurbanization as articulated in the Kitchener Official Plan and Growth Management Strategy as well as Kitchener s Economic Development strategy: Make it Kitchener. FINANCIAL IMPLICATIONS: Adding new Regional development charges for transit and waste diversion could negatively impact planned development in Kitchener s downtown core. This would mean less assessment growth which would negatively impact property tax and utility revenues anticipated from these new developments. COMMUNITY ENGAGEMENT: This report suggests that The City of Kitchener engage as a stakeholder in the public consultation on the Transit and Waste Diversion Development Charges. CONCLUSION: The City of Kitchener has a significant interest in the maintenance of the current development charge framework including the downtown exemption and the reduced development charge for manufacturing investment. The Region of Waterloo should be encouraged to consider the potential adverse consequences of implementing the proposed Transit and Waste Diversion Development Charges uniformly across all residential and non-residential categories and maintain the current commitments to the downtown exemption and the manufacturing discount rate. ACKNOWLEDGED BY: Jeff Willmer, CAO