Term Paper: The City of Regina’s Development Levies Ashley Paton 500489817 PLG710 Professor Craig Binning November 10th, 2015 Disclaimer: The views and opinions expressed in this paper are those of the author and do not necessarily reflect the official policy or position of the City of Regina. The information and analyses in this report are based only on what data was available and accessible at the time.
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November 11th, 2015 To:
Members of Executive Committee
Re:
Policy and Strategic recommendations for Development Levy and Servicing Financing Agreement Fees for Infill Development _______________________________________________________________________ RECOMMENDATIONS 1. That the Executive Committee approve the removal of the existing infill Development Levy exemption zone, as per report EX15-22 2. That there be an exemption of Servicing Agreement Fees and Development Levies for the development of secondary, laneway and garden suites on infill properties 3. That there be an exemption of Servicing Agreement Fees and Development Levies for the redevelopment of brownfield sites on infill properties 4. That the impact of laneway and garden suites on existing infrastructure and transportation capacities, as well as the potential impacts of a Development Levy exemption, be looked at in coordination with the review of the Laneway and Garden Suites Guideline following the Laneway and Garden Suites Pilot Project 5. That the City create quantifiable housing targets for purpose-built rental, affordable ownership, entry-level ownership, secondary suites, and affordable rental and transitional housing as part of an update to the Regina Comprehensive Housing Strategy (2013). PURPOSE The purpose of this report is to discuss the options available to the City of Regina as they move towards the removal of their infill development levy exemption zone and to explore possible exemptions to Development Levies (DL) in order to achieve the strategic goals
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and objectives outlined in the Official Community Plan (OCP) Design Regina, 2013 while still ensuring the long-term financial viability of the City. This report follows the orders of the Executive Committee made on November 4th, where they directed the Administration to provide a supplemental report that would contain information on different models including area-specific rates and associated financial implications (City of Regina, 2015).
BACKGROUND The City of Regina is the second-largest city in the province of Saskatchewan and as outlined in Design Regina (2013), the City’s Official Community Plan (OCP), the city is planning and managing growth for a population of 300,000 over the next 25 years (City of Regina, 2013, p. 3). Servicing Agreement Fees (SAF) and DLs are charges levied by the City to pay for the capital costs brought on by population growth. SAFs are levied at the subdivision stage via a Servicing Agreement between the City and the developer while DLs are levied when a development permit is issued on lands that do not require subdivision but would otherwise be subject to SAFs.
DECISION HISTORY On October 14th, 2015, the City Planning and Development Department put forward a series of recommendations to the Executive Committee including an update to the “Administration and Calculation of Servicing Agreement Fees and Development Levy Policy” which would see the introduction of a three-year phase-in for a new Greenfield SAF and DL rate which would be set at $379,000, effective January 1, 2016 (EX15-22, p.6, 2015). The staff report EX15-22 also recommended changes to the method of
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calculating the share of capital costs allocated to greenfield and infill development, which would place less stress on the mill rate to pay for growth-related infrastructure projects. The monies collected from SAFs and DLs for projects that would accommodate one type of growth over another, either Greenfield or infill, would be allocated 100% to the appropriate projects, while the monies collected from SAFs and DLs for projects that accommodate both greenfield and infill growth would be allocated to both types of projects based on their share of growth, as seen below.
Source: City of Regina, 2015
Since 1989 there has been a large exemption zone for the charging of DLs as seen below. This area shown in green is the area that the recommendations below will be applied to, whenever the term “infill� in used.
Source: City of Regina, 2015
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Based on the public consultation done as part of the EX15-22 report, it was noted by both the public and City staff that there is a need for a differential rate for infill development and that the exemption zone shown above should be removed. The recommended updates proposed in the “Administration and Calculation of Servicing Agreement Fees and Development Levy Policy” have their benefits in proposing a fair and equitable way to splitting costs between taxpayers and developers. Lands already exempt from DLs, as per section 4.7 in the proposed “Administration and Calculation of Servicing Agreement Fee and Development Levy Policy (Appendix A)” (2015) are: “Internal environmental reserves; freeways; expressways; interchange lands; major utility corridors (electrical transmission corridors and pipeline corridors unfeasible for development as a result of safety and/or environmental regulations) lakes; lands used to accommodate permanent City-owned pump stations or lift stations. The City is currently developing a financial policies framework and long-range financial plan, which will help to mitigate risks to taxpayers, with regards to the SAF and DL rates.
RELATIONSHIP TO DESIGN REGINA (OFFICIAL COMMUNITY PLAN) One of the main policies outlined in Design Regina: The Official Community Plan Bylaw 2013-48 is policy 1.16, which states “growth pays for growth”. Policy 1.16.3 states that this will be ensured by “reviewing the areas to which Service Agreement Fees apply, including the possibility of fees varying with location, density and use as necessary” (p.15). In order to achieve the goals and policies outlined in the OCP, encouraging infill development is necessary. A few of these policies include 2.3: directing 30% or more of new population to existing urban areas, 2.5: developing compact and contiguous neighbourhoods, and 2.9: directing 10,000 or more new residents to the City Centre.
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Intensification will play a major role in whether the city achieves these goals or not and it requires the redevelopment of underutilized, vacant, and contaminated parcels of land. With that being said, the City’s linear infrastructure is aging and, with intensification, it is in danger of exceeding capacity. In order to properly fund the needed upgrades to linear infrastructure, which includes “sewage, water, drainage works, roadways, parks and recreational facilities”, the City needs to ensure adequate revenue sources (Planning and Development Act, 2007, s.169). This is not to say the City cannot continue to use and explore innovative public-private partnerships like the one being used to upgrade the Wastewater Treatment Plant, but the collection of DLs on major infill projects within the city will significantly affect the City’s ability to fund the upgrades needed because of intensification (City of Regina, 2015).
OPTIONS As per s.169(7) in the Planning and Development Act, 2007, municipalities can exempt land uses, classes of development, or zoning districts from development levies if specified in their development levy bylaw. As mentioned previously, the City of Regina currently has an exemption zone for the already developed areas of the city. In order to achieve the growth and intensification targets set out in the OCP, various incentives could be used via the development levy bylaw to encourage specific types of development. Development Levy Rate Exemption for Secondary Suites, Accessory Suites, and Laneway Housing One of these incentives could be to decrease the amount payable for the addition of a secondary, garden or laneway suite on infill lots. In the City of London’s Development
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Charges Bylaw, it exempts developments that create one or two “additional dwelling units in an existing single detached dwelling or one additional dwelling unit in any other existing residential building, provided that the total gross floor area of the additional unit(s) does not exceed that of the existing dwelling” (Part V, s.36(b)). The City of London and the City of Regina both have similar intensification targets and are both facing the problems associated with aging infrastructure (City of London, 2015). One of the main objectives of the Saskatchewan Provincial Housing Strategy is to increase the supply of rental housing. From a supply perspective, homeowners who are thinking of building a secondary suite are going to be deterred from doing it through the proper legal channels if they are required to pay the development levy rate. Goal 3 in the City of Regina’s Comprehensive Housing Strategy (2013) also calls for the creation of secondary suites in order to encourage more compact development and to increase the supply of affordable housing. If an exemption on DLs is given, homeowners might me more inclined to build secondary, garden or laneway suites, and do so through the correct legal and regulatory channels, which would mean an increase in the overall supply of housing units. The impact of laneway and garden suites on existing infrastructure and transportation capacities, as well as the potential impacts of a DL exemption, should be looked at when reviewing the “Laneway and Garden Suites Guidelines” after the Laneway and Garden Suites Pilot Project, which is set to begin in November of 2015 (City of Regina, 2015). Financial Implications The City of Regina does not currently have any specific targets for secondary suites but the City of Saskatoon does in their 2013-2022 Housing Business Plan. Their target for secondary suites is thirty per year. Saskatoon and Regina have similar Federal and
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Provincial funding sources available to them for the provision of affordable houses and secondary suites as well as similar populations, which is why Saskatoon’s target was used for the calculations below. The following calculations use the proposed 2016 phase-in rate of $379,000/10,000m2 1 and considering that the average lot size in 2015, based on the City’s property assessment data is 640.3m2, the estimated development levy, per residential unit, is $24,267.37 2 (City of Regina, 2015). Projected Annual # of Secondary Suite Applications 2016 30
2016 Development Levy Rate without exemption (per unit) $24,267.37
2016 Development Levy Rate with exemption (per unit)
Potential lost Development Levy revenue for City because of exemption
$0
$728,021
This option, if accepted would not be providing the city with any new revenues and would not be taking any revenues from existing sources as the exemption zone is the prevailing policy. Development Levy Rate Exemption for Brownfield Sites There are many economic, social, and environmental benefits to redeveloping brownfield sites and redevelopment supports two OCP policies including 2.10.5, which states that intensification should occur on diverse parcels of land including brownfields. Policy 8.5 also states that brownfield redevelopment for the purposes of increasing the supply of housing should be encouraged. The City of Saskatoon has an extensive brownfield strategy and one of the practices they employ in order to encourage the redevelopment of brownfields is the development of a set of criteria for older and potentially contaminated properties that allows the City to 1 As per the phone conversation on November 5th 2 10,000/640.3 = 15.62… units/ha. 379,000/15.62… = $24,267.37
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waive off-site levies, or DLs. If a DL exemption is not given for brownfield sites, these lots have the potential of staying vacant for several more years with the possibility of becoming more contaminated, leaving unlocked potential in some of the city’s most central locations and possibly creating a health hazard for nearby residents. The impact of a DL exemption on brownfield sites could lead to the revitalization of derelict neighbourhoods and could have positive benefits on the tax base. Financial Implications As per the EX15-22 Staff report, the $379,000/ha rate is for residential, commercial, and industrial. This rate is applied below to a non-exhaustive list of vacant lots that were previously service stations.
Lot Size Lot Size Development Levy (ft2)* (ha) Charge 1005 Pasqua Street NA NA NA 1035 Pasqua Street 20,048 0.1863 $70,589 3134 Dewdney Avenue 13,511 0.1255 $47,572 2809 Dewdney Avenue 10,139 0.0942 $35,699 2700 Dewdney Avenue 13,523 0.1256 $47,614 367 Albert Street North NA NA NA 2165 Albert Street 18,732 0.1740 $65,955 15th Avenue and Albert Street NA NA NA 856 Dewdney Avenue 21,122 0.1962 $74,370 328 Victoria Avenue 22,893 0.2127 $80,606 101 Victoria Avenue East 12,125 0.1126 $42,692 106 Victoria Avenue East 45,465 0.4224 $160,082 802 Dewdney Avenue East 23,341 0.2168 $82,184 1775 Dewdney Avenue East 18,925 0.1758 $66,635 1920 Victoria Avenue East 43,729 0.4063 $153,970 2020 Victoria Avenue East NA NA NA Total 263,553 2.4485 $927,969 *Source: City of Regina’s Assessment & Taxation Records Address
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This $927,969 of revenue that could be collected from the development of these vacant and contaminated lots would be surplus to the city as the current policy allows for these properties to be exempt from paying anything. Development Levy Rate Exemption for Affordable Housing Units Goal 1 in the City of Regina’s Comprehensive Housing Strategy (2013) is to increase the supply of affordable housing, including affordable ownership and rental units. Affordable housing is defined as a household spending 30% or less of their pre-tax income on shelter costs (Canadian Mortgage and Housing Corporation, 2014). Affordable housing is subsidized from the Federal and Provincial levels of government and the number of units built is dependent on funding from these levels of government. If a DL exemption is not given to affordable housing developments, developers might be encouraged to build in Saskatoon rather than Regina because of their existing incentives, which has several impacts on the City’s potential tax base and the City’s ability to achieve their affordable housing goals. Financial Implications The City of Regina does not currently have a defined set of targets for affordable housing but the City of Saskatoon does. Regina and Saskatoon have similar Provincial funding sources and incentives in order to encourage developers to build affordable housing. Therefore for the purposes of calculating the financial impacts of a possible DL exemption, Saskatoon’s target of 70 “affordable rental and transitional housing” and 100 “affordable ownership” will be used (City of Saskatoon, 2013, p.9). The City of Saskatoon differentiates between purpose-built rental, affordable ownership, entry-level ownership, secondary suites, and affordable rental and transitional housing. For each of these different types, the City has set annual targets to meet. The City of Regina, in their
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public consultation should explore the possibility of different exemptions or discounts based on these different types.
# of Units (per year) 170
2016 Development Levy Rate without exemption (per unit) $24,267.37
2016 Development Levy Rate with exemption (per unit)
Potential lost Development Levy revenue for City because of exemption
$0
$4,125,453
The Saskatchewan Provincial Housing Strategy outlined a few different funding programs and incentives for both municipalities and homeowners including the Province’s Rental Development Program that funds up to 70% of the capital costs for new affordable rental units, the Province’s Rental Construction Incentive (RCI) that matches grants of up to $5,000 per affordable ownership home constructed, and Head Start on a Home that provides incentives for developers to construct entry-level homes (City of Saskatoon, 2013, p.4). The City could explore a way of diverting a portion of these funds to the infrastructure projects needed to accommodate the increased densities.
CONCLUSION The City of Regina continues to experience a steady increase of population and in order to achieve the intensification and infill targets outlined the OCP the City needs to look for ways to incentivize secondary suites, affordable rental and ownership housing, and redevelopment on brownfield sites. At the same time the City faces extensive and expensive linear infrastructure upgrades needed as a result of increased densities and diminished capacities of the existing infrastructure. Exploring the possibility of DL exemption zones or discounts, specifically for affordable housing units and brownfield sites, following the removal of the existing exemption zone that covers the entire existing
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city would help the City to achieve the policies of the OCP and of the Province’s several strategic goals. Creating targets and reporting on the progress of achieving these targets for this would aide the city in being more transparent and accessible to the public.
Respectfully submitted,
Ashley Paton, Planner II, City Planning Department
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REFERENCES Canadian Mortgage and Housing Corporation. (2014). Housing in Canada online definitions. Retrieved from http://cmhc.beyond2020.com/HiCODefinitions_EN.html City of London. (2015). Our city - the London plan. City of Regina. (2010). Population, employment and economic analysis of Regina. Retrieved from http://www.designregina.ca/wpcontent/uploads/Population_Employment_and_Economic_Analysis_of_Regina_ -_2010.pdf City of Regina. (2013). Comprehensive housing strategy. City of Regina. (2015). Laneway and garden suites guidelines/pilot project. Retrieved from http://www.designregina.ca/currentprojects/laneway-and-garden-suites/ City of Regina. (2015). Proposed 2015 city of Regina budget highlights. Retrieved from http://www.regina.ca/opencms/export/sites/regina.ca/residents/budget/.media/pdf /2015-budget-highlights.pdf City
of Regina. (2015). Residential property statistics. Retrieved http://www.regina.ca/residents/assessment/tax-property-search/resistats.htm?accountNumber=10037065
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City of Saskatoon. (2009, July). Redeveloping brownfields in Saskatoon. Retrieved from https://www.saskatoon.ca/sites/default/files/documents/communityservices/planning-development/neighbourhoodplanning/housing/brownfields_final.pdf City of Saskatoon. (2013, May). Housing business plan 2013 to 2022. Retrieved from https://www.saskatoon.ca/sites/default/files/documents/communityservices/planning-development/neighbourhoodplanning/housing/City%20of%20Saskatoon%20Housing%20Business%20Plan %202013%20-2022.pdf City of Saskatoon. (2015, April 8). Financing growth study. Retrieved from https://www.saskatoon.ca/sites/default/files/financing_growth_study_hemson_co nsulting_april_2015.pdf City of Regina (2015, November 4). Executive Committee. http://regina.siretechnologies.com/sirepub2/mtgviewer.aspx?meetid=1063&doctype=MI NUTES EX15-22. City of Regina (2015, October 14). Executive Committee Package.
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https://www.dropbox.com/sh/qsx6f5p6j1v6pri/AAA6IHCexem--B26CbXol7Ga?dl=0 Markusoff, J. (2014, December 16). Analysis: digging into the numbers on secondary suites. Calgary Herald. Saskatchewan Ministry of Social Services. (2011). A strong foundation – the housing strategy for Saskatchewan (provincial housing strategy). Retrieved from http://publications.gov.sk.ca/documents/17/76213-2011-19-Housing-Strategyfor-Saskatchewan.pdf Statistics Canada. 2012. Regina, Saskatchewan (Code 4706027) and Division No. 6, Saskatchewan (Code 4706) (table). Census Profile. 2011 Census. Statistics Canada Catalogue no. 98-316-XWE. Ottawa. Released October 24, 2012. http://www12.statcan.gc.ca/census-recensement/2011/dppd/prof/index.cfm?Lang=E Van der Linde, D. (2015, October). Why virtually every Canadian engineering and construction company is seeing a rise in its stock price. Financial Post.
APPENDIX
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Appendix A
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