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Development charges: too much, too soon

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After another gruelling six-hour session, Monday, council passed the updated development charges bylaw, adding thousands of dollars to the cost of a new home, and within three years doubling the current development charges to more than $21,000.

That means new home buyers will be facing higher costs for houses again; pushing the cost of home ownership away from the reach of young families coping with the hospitality-retail incomes they can get in this area. Not only will developers pass these charges on to the buyers, but may likely do so with an added margin to cover their own costs in paperwork, bank charges, interest and legal fees. So it's not just our $21,000 on house prices we added - it could be much more.

Basically any amount tacked onto a house price gets doubled at the bank when you apply for a mortgage. Over the life of your mortgage, you will pay at least twice the cost of the amount borrowed, in interest, insurance and bank fees. The result: the $21,112 DC we levy now will mean the buyer pays $42,000 for it. And if the developer adds another $5-10,000 to recover his/her costs... you see how it escalates.

We've seen the housing market slump in the past year - the recession dealt it a nasty blow. Several developers stopped building, a few went out of business. The market is only just starting to recover. I am worried these new charges will knock it back to its knees again.

I understand development charges and their need. I'm not opposed to them, in principle, just think in this economy we're being very short-sighted to apply such massive new taxes (and DCs are, after all, taxes). We could easily price ourselves out of the market if our neighbours keep their DCs more reasonable. We should have applied some common sense heuristics to these charges and not simply pile them up on new homes to discourage any but the rich and the retired to move here.

These levies are supposed to pay for services like infrastructure - roads, water, sewer - as well as a portion of common facilities and services like parks, library, parking, police and fire protection. As the mayor frequently comments, "growth should pay for growth". In theory that seems fair, but in practice it never quite works out like that.

We should encourage smart growth, sustainable growth, carefully planned development - not simply tax all growth and development into submission. Well, we now run the risk of taking the latter road.

First and foremost: we apply DCs as a flat fee on all new development across town. But should they be applied equally in areas already built up - areas where the province is encouraging us to intensify? Areas with existing infrastructure and services, like the downtown core, could have lower area-specific charges to encourage development in or near the core. Apply higher charges in peripheral developments to discourage sprawl. That seems to me to be a more sustainable idea, to me. But no, we have a one-size-fits-all approach.

And we apply the same DC charge for affordable housing developments, a self-defeating exercise since it clearly can make the housing unaffordable. This council has, generally, not been sympathetic to affordable housing, some of our members sounding overtly hostile at times when affordable housing issues have been raised (like last night's comment about where to locate "those units" which Councillor Sandberg remarked sounded suspiciously like the NIMBY response about building homes for "those people" encountered when we tried to build an affordable complex in the east end).

Here's another idea to throw into the mix: say a developer creates a subdivision at the edge of town. The town builds roads and sidewalks to it, we lay trails, extend police and fire service, lay water, hydro and sewer lines, provide snow clearing and garbage pickup - but the increased cost of the houses due to the higher DCs discourages buyers and slows growth so the developer doesn't apply for building permits (the time at which he/she pay the DCs) or applies for fewer than projected. We - the town - still have to provide and pay the full level of fire, police, snow clearing and other services based on the new area of growth even if underpopulated. If the DCs collected don't pay for the level provided, the rest of the taxpayers - you and me - pay the difference. So growth won't be paying for growth. We will.

And the DCs for apartments in multiple-unit buildings also discourage low-cost or affordable rentals: bachelor and one-bedroom units add $9,584; more bedrooms add $13,438 each. The developer will have to get these fees from the apartment rents. Assuming the developer takes these over five years, that adds another $224 per month to a two+ bedroom unit and $160 to a smaller apartment. For someone making $10 an hour, that's a lot of money. Where's the incentive for developers to build affordable or even reasonably-priced apartments, if their potential clients can't pay the rent?

We should be encouraging apartment development, not finding ways to poke a stick in its wheels. A lot of local workers need (or want) rental accommodations, not houses. Why not make it less expensive to build apartments in the existing developed/core area? Wouldn't that encourage more of that sort of development?

'Non-residential' properties gets their increase spread over five years. Aside from higher fees discouraging industrial and commercial growth, why the bias over residential as to the time for the fees to be applied? In the past, the mayor has argued to shift industrial taxes onto residential tax levies, lowering industrial taxes at the expense of home owners and commercial businesses. I've always fought that because it would again further distance home ownership in this town from all but the rich, and punish local taxpayers and small business owners. This seems to be a similar sort of approach, a backhanded slap against residential.

Any why are commercial developments - the small businesses, retaillers, service shops, financial institutions, doctors, lawyers, dentists - paying that much more in DCs? These charges will make new commercial development more expensive to the developer, and also to the potential tenants, since the developer will have to recover those additional costs out of the rents. The source of most of this region's jobs is those very same small businesses. This does nothing to quell the already-widespread belief that "Collingwood is closed for business."

Will higher DCs encourage commercial growth? I seriously doubt it. I suspect it will make Wasaga Beach and the Blue Mountains much more attractive as host communities for that sort of growth - just build over the border the the Collingwood residents will come to shop there (we heard about a large potential commercial development on Highway 26 just over the Collingwood border last night - one that will draw a lot of west-end residents to shop because it will be easier and faster to reach than driving along the slow 50 km/h stretch of road into Collingwood).

Within five years, there will be a DC of $5.43 per sq. ft levied on new commercial and industrial development. For a typical retail strip mall, that means a 2,500-sq.ft store adds another $13,575 to the cost of the unit - money which will be paid by the tenant in rent. For a large floor plate - say 50,000 sq. ft. - that's another $271,500. And for a 100,000 sq. ft. big-box store, that's $543,000. Someone has to pay that - not just the developer. The tenant will have to pass the costs along to the consumer - through higher prices and lower wages. The money has to come from somewhere.

You and I eventually pay these costs, too (that is, assuming the higher rental costs don't deter these companies from locating here and instead send them scrambling for a less-expensive spot in one of our neghbouring communities.)

So higher DCs may look good on paper, but in the long term they can mean more costs to taxpayers and consumers. Growth doesn't really pay for growth: you and I pay for it. That's why I prefer a sustainable growth plan as a solution to our future, not merely another tax.

I argued for a longer phase-in period, both to give the slumping economy more time to recover, and to keep those additional costs from being dumped on the local economy so abruptly. But in a recorded vote, I was the sole objector.

Your points on the adverse effects of the Development Charge are very timely as we have just recieived our Collingwood tax notice with higher charges. It appears that there is little effort by the Collingwood Council to reduce expenses and keep our taxes under control.

There is nothing wrong with the Town’s development charges to recover direct servicing costs. However, a blanket fee for all developments is not very bright as it just continues the apparent policy of encouraging new subdivisions rather than improving existing areas through densification.

All the details are not readily available but I think development charge exceptions have been made for the expansion of industrial properties. Why not for other residential properties as part of a sustainable growth plan? I fear the ‘one size fits all mentality’ will just end up costing more in the long run. Maybe, if Councillors were provided with monthly financial statements as in any credible organization, they would be more aware of Town expenses and commitments. There should at least be quarterly financial statements as provided to the Simcoe County Council.

Please keep up your objections.

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