Successful redevelopment of Uptown Waterloo means no more subsidies for builders
December 26, 2009 By Terry Pender, Record staff | http://news.therecord.com/News/Local/article/649321
City planners believe there is now enough interest, momentum and optimism about their downtown’s future that developers should no longer be subsidized by taxpayers for building there.
On Jan. 1, the City of Waterloo ends a program that waived millions of dollars in fees for development in the core. It is the first city in this region to drop the waiver of downtown development charges since the programs were put in place in the 1990s.
In Waterloo for every single-detached or semi-detached house built, the developer pays $13,372 to the city, almost half of which will be spent on roads to service new homes.
For apartment buildings, the development charge is $9,302 per unit. Non-residential developments pay $51 per square metre in development charges. On a large project these fees can add millions to the cost.
Developers have rushed to get approvals in place before the fee-exemption for downtown projects.
Next year, there could be as many as four construction cranes near Erb Street — two on the BarrelYards site, one at the Knox Presbyterian Church and another at the Balsillie School of International Affairs.
Developers are rushing to get applications and building permits in place before the subsidies end. While developers do not pay the fees, the City of Waterloo must put an equal amount into a special reserve fund.
That amount could be as high as $13.7 million for 2008-2009. Waterloo city councillors must decide in the new year how they will come up with that amount of money.
...Cambridge and Kitchener will continue to exempt downtown projects from development charges.
It's going to be interesting to see what the ramifications of this are, if any.
I don't know that it'll hurt Waterloo too much. I think the developers that want Waterloo bad enough, will spend the extra money.
Kitchener on the other hand, I think could benefit from this quite a bit. Should be interesting to see how it pans out.
Does this mean we could see a number of projects being approved in the near future? Or does this only apply to projects that are already approved and are just waiting for permits?
A good editorial in response to this article ^
Waterloo’s core has bright future
January 04, 2010
The City of Waterloo has a special reason to celebrate as this new year begins. It will no longer waive the development fees for buildings constructed in Waterloo’s core.
The development industry may regret the loss of this indirect subsidy, but council's decision, in general, is positive. The city, with good reason, thinks that the core area has developed so well that the city in future won’t have to offer this special incentive to encourage developers to build there.
Waterloo’s core now has such a positive reputation that the regular market forces are pushing developers toward it. What this means is that the developers should be able to make a reasonable profit on a project in Waterloo’s core without this form of public subsidy.
The development fees are significant, particularly on a large project. The city charges $51 per square metre for non-residential developments. Until now, other taxpayers have absorbed the costs that would have been covered by the fees.
During the past decade, Waterloo’s core has been one of the brightest real estate stories in the region, if not in the entire province. This is a core that was once home to a brewery and a distillery as well as other industries that closed their doors. For a time, the future looked bleak.
In recent years, numerous retail, commercial and institutional projects have blossomed on once-deserted properties. Certainly the philanthropic projects started by executives at Research In Motion, such as the Centre for International Governance Innovation and the Perimeter Institute for Theoretical Physics, have helped the core, but commercial projects such as the redevelopment of Waterloo Town Square have also had a positive impact.
Waterloo has had the right mix of high-tech businesses and educational institutions to make its core particularly vibrant.
The cores of cities such as Kitchener and Cambridge may have made progress, but they aren’t at the point at which their councils are ready to remove the subsidy from the general taxpayer. They still face challenges caused by various factors such as the shifting nature of the region’s economy and the popularity of big box stores in suburban areas.
Kitchener and Cambridge, therefore, can expect to continue to subsidize their cores by waiving development fees for some time to come. Core areas are important. Their importance goes beyond the geographical boundaries of the core because they create an image of the community in which they are located. This is why municipal councils are prepared to offer various forms of subsidies to help them. No would dispute, however, that a core that doesn’t need a subsidy is healthier than one that does.
WAT: FINANCE & STRATEGIC PLANNING COMMITTEE MEETING
Monday, May 10, 2010 6:30PM
6. CONSENT MOTION
That Consent Motion Items (a) to (h) be approved.
c) Annual Statement of Development Charges | Page 21
Staff Report: FS2010-023
Prepared By: Erin Gray
Recommendation: “That Council receives for information the Annual Statement of Development Charge Reserve Funds for the year ended December 31, 2009.”
Summary 2009 Consolidated Statement
A consolidated statement of the Development Charges Reserve Fund for the year ending December 31, 2009 is attached and can be presented as follow:
Opening Balance January 1, 2009 | $ (12,384,297)
Revenues | $ (11,811,613)
Interest Earned | $ (227,892)
Expenditures | $ 13,654,385
Debt Charges | $ 925,125
Closing Balance December 31, 2009 | $ (9,855,292)
Under the current Development Charge Bylaw, revenues for 2009 were targeted to be $7,062,269. At the end of the year the City had achieved $11,811,612 in revenues or 167.24% of the target. This was a direct result of the ending of the Core Area Exemption on December 31, 2009. The City has funded $3.72 million of the total obligation of the $10.62 million. Excluding the Core Area Exemption Funding, the revenues were $8,091,612 or 114.58%. There were 838 residential equivalent units, an increase of 301 from the prior year of 537 and 431 more than the budget of 407 residential equivalent units. This is also directly attributable to the end of the Core Area Exemption. Of the 838 residential equivalent units, 501 are within the Core Area leaving 337 residential equivalent units outside the Core Area. The number of non residential square metres was higher this year at 143,957m2 of which 51,889m2 was exempted under the Core Area Exemption and 24,871m2 was exempted for statutory reasons for a total of 67,196m2. This was more than the budgeted 36,000m2 however it is slightly less than the prior year of 69,993m2.
Capital Budget Expenditures
The 2009 Capital Budget included $21.387 million in forecasted expenditures to be funded from the Development Charge Reserves. Actual funding for projects receiving approval was in the amount of $13.654 million. The variance is the result of the deferral of several projects including: Clair Creek (North Branch) - Vista Hills (north pond) $2.1 million, Columbia Street Extension $3.7 million, Wilmot Line - Erb St. to Columbia $1.3 million and several smaller projects.
Total Outstanding Debt
The total outstanding debt or the principal unpaid which is related to the Development Charges Reserve Fund has a balance of $2,902,203 at December 31, 2009. The annual payments that are associated with these debentures are being expensed from this reserve fund and are not tax supported. Last year these debenture payments were in the amount of $925,125.
Financial Implications: Council is still in the process of identifying and appropriate funding source for the remaining $6.9 million obligation resulting from the Core Area Exemption
Last edited by UrbanWaterloo; 05-10-2010 at 11:30 AM.
2009 DEVELOPMENT CHARGE TRANSACTION REPORT
REGION OF WATERLOO FINANCE DEPARTMENT: Financial Services and Development Financing
TO: Chair T. Galloway and Members of the Administration and Finance Committee
DATE: May 18, 2010 | Report: F-10-041
Development Charge Reserve Fund Balances
The Regional Development Charge Reserve Fund (RDC Fund) started the year with a balance of $73.1 million. At the end of 2009, the RDC Fund had a balance of $96.8 million as a result of the transactions detailed below (see Appendix A). As noted below, collections were approximately $7.7 million higher than capital funding in 2009. The increase in the Reserve also results from interest income and funding of exemptions and discounts from user rates and property taxes. In 2009, exemptions were approximately $12.9 million, a large part of which was a result of the City of Waterloo ending their downtown core development charge exemption as of December 31, 2009, which greatly increased development in this area. 2009 discounts of approximately $10 million are another major factor for the Reserve Fund increase. The August 1, 2009 RDC rate increase was deferred for the period of August 1 to December 31, 2009, resulting in the 2009 discount. Both exemptions and discounts are funded from user rates and property taxes. The current RDC balances will be drawn down as the expansion capital programs are implemented.
2009 Development Charge Collections
Development charge collections (including $10 million in discounts) in 2009 totaled $39.5 million, an increase of approximately 34.8% over 2008 collections of $29.3 million. Of the total collections, $22.4 million was attributable to residential developments and $17.1 million was for non-residential developments (see Appendix B).
2009 Development Charge Capital Appropriations
In 2009, appropriations to finance growth-related capital projects and debt charges totaled $31.8 million. Table 1 provides a breakdown of 2009 appropriations by service groups (see Appendix B for summary and Appendix C for details by project).
Table 1: 2009 Appropriations to Capital ProjectsExemptions and Discounts
Item | 2009 Appropriations
Roads Capital Projects $11,816,614
Airport Projects $102,886
Water Supply Capital Projects $12,401,351
Wastewater Treatment Capital Projects $5,220,559
Police Projects $1,273,630
Library Capital Projects $81,788
Transit Capital Projects $479,220
Debt Charges $334,076
Major exemptions provided in the RDC By-law are: Downtown core exemption, and exemption for Contaminated Sites. The DC Act specifies that any shortfall in development charge revenue resulting from exemptions and/or discounts must be made up from sources other than higher charges on other development. The total cost of development charge exemptions is financed from user rate reserves and property tax levies. Table 2 provides a summary of exemptions applied in 2009.
Table 2: 2009 ExemptionsThe components of the current year exemptions include approximately $12,225,000 related to downtown core developments, and $619,000 related to brownfield site developments. The balance of $52,000 was related to other exemptions, as provided in the RDC By-law. Approximately $8.7 million of the exemption costs was funded from property tax (mostly Roads Capital Levy), and $4.2 million from User Rate Reserve Funds.
Type | Exemptions
Residential $ 7,942,897
Council in an effort to create a stimulus to boost the economy in very tough economic times approved a deferral of the August 1, 2009 RDC rate increase. The result of the Council decision to approve a RDC rate discount for the period August 1 to December 31, 2009, resulted in a funding increase of approximately $10 million, which was funded from the Roads Capital Levy and Water/Wastewater Reserve Funds. The impact of this significantly reduced the balances in the Reserves previously mentioned, however it is important to note that this was a one-time allocation to these Reserve Funds and funding of discounts will not continue after December 31, 2009. Table 3 provides a summary of discounts applied in 2009.
Table 3: 2009 Discounts
Type | Discounts
Residential $ 3,961,970
Waterloo proposes to drop residential development charges 20 per cent
Nov 30, 2012 | Paige Desmond | The Record | LINK
Didn't see this anywhere else.WATERLOO — Development intensification could mean an average 20 per cent drop in development charges to residential developers in Waterloo.
As the city runs out of greenfield land to develop, it’s shifting its focus to building up instead of out.
That’s driving policy changes, including a new development charge bylaw which will be voted on Dec. 10.
Last edited by Greg Moore; 11-30-2012 at 08:16 PM.
I'm not seeing the spin quite match up with the proposal. In general, urban intensification requires less infrastructure and thus should have less in development charges. Especially considering that much of the development charges goes to fund road construction. But... why given all that, what does that have to do with single detached houses getting the same decrease in development charges?As the city runs out of greenfield land to develop, it’s shifting its focus to building up instead of out. That’s driving policy changes, including a new development charge bylaw which will be voted on Dec. 10.
I had the same first reaction, but I wonder if the situation in Waterloo means that future single and semi-detached houses will be built on land that already has infrastructure in place? I find it interesting to think of Waterloo as a city that may have no option but to grow "up" rather than "out".
With several categories of intensification infrastructure, we have already seen the City attempt to download the costs onto existing stable neighbourhoods by unilateral actions which reduce the value and liveability of the districts. (Ironically, the longstanding health of these communities has made the Uptown an attractive destination for development.)
Namely: by using neighbourhood streets to run inappropriate but cheap above-ground 3-phase hydro infrastructure; by re-designating local streets to collector roads to handle intensification traffic; on the horizon, by avoiding the creation of parking space by dumping it onto neighbourhood streets.
One has to question some of the assumed truths of intensification, specifically, economies of scale with infrastructure, and less reliance on the automobile.
The proposed reduction in development charges looks more like wilful blindness and a transfer of hidden costs off the backs of the development industry and the enabling municipality. Perhaps if development charges were at a sustaining level, hydro infrastructure could be buried on major streets, arterial roads could be built / improved, public transit could be made attractive, and the cars which are not being traded in for bicycles could be stored in the garages of their intensification hosts.
Given Waterloo's infrastructure deficit (and it is by no means alone), are development charges able to be used to upgrade existing infrastructure in the vicinity of the development. For instance, I'm assuming that the Lester Street reservicing between Seagram and University had something to do with the new buildings that popped up along there. If development charges can't be used for that kind of work, what will it take to change that? Or is the assumption that the new tax revenue will pay for the infrastructure upgrades?