It appears the city has little appetite to relieve taxpayers of millions each year in subsidies for sprawl development. While corporate services staff are suggesting some minor increases in development charges (DC), they also call for continuing steeply discounting industrial growth fees and are facing a battle to even end a policy that has deferred $10 million in payments by developers.
Reforms to make growth fees more equitable for redevelopment projects and set more realistic charges for greenfield sprawl also appear unlikely to make much headway. And a sharp drop in industrial building permits and anemic growth in residential construction means more pressure to provide even greater subsidies in hopes of reversing these trends.
The first of three meetings of the city’s development charges stakeholders committee last week revealed that industrial growth is way down from the previous year. The presented figures compare July to July periods that show $195 million in industrial building permits a year ago but only $62 million in the first three-quarters of the current period, with permits exceeding $1 million each dropping from twenty-two down to six.
Currently the city charges $9.60 per square foot for new industrial and commercial development instead of the $15.81 that it’s allowed to collect under provincial rules. Staff are recommending no increase be imposed. Burlington rates are set to rise to $20.55, but fees in Guelph and Brantford are lower than Hamilton’s.
Ontario legislation currently under review by the provincial government prevents municipalities from collecting at least one-quarter of growth costs. In addition, various DC discounts and exemptions approved by city council already shift about $10 million a year in growth costs onto city taxpayers, while another $9 million is added annually to water and sewer rates.
Staff are suggesting that one of the discounts – a 90 percent reduction in growth fees in downtown Hamilton – be lowered to 75 percent, either immediately when the new development charges bylaw comes into effect in July, or gradually by 5 percent a year.
Council approved the drastically lower growth fees in the downtown in the face of arguments that pre-existing pipes and roads mean the actual costs of such development is far lower than on suburban greenfields. An alternative is to charge differential fees based on actual growth costs in different parts of the city as advocated by Pamela Blais, author of the acclaimed book Perverse Cities: Hidden Subsidies, Wonky Policy and Urban Sprawl.
“The actual costs to develop on greenfield lands are about 80 percent higher than are those to develop on already urbanized land,” she contends. “Perversely, the more efficient house ends up subsidizing the inefficient house – akin to a smart car subsidizing a Hummer.”
Hamilton levies uniform fees irrespective of the location or size of new residences not the actual cost of servicing them, so a modest house on a forty foot lot in the lower city pays exactly the same growth fees as a sprawling mansion on a half-acre lot in Binbrook, even though one uses existing infrastructure and the other requires entirely new pipes, roads, schools, etc.
A “white paper” on the Blais approach is being promised for the next meeting of the stakeholders committee on March 31, but the consultant hired to prepare it is already pouring cold water on the idea. Gary Scandlan of Watson and Associates told last week’s meeting that retrofitting of services for older parts of the city may actually cost more than providing new ones for greenfields. Scandlan is also tasked with preparing the DC background study – something his company does for dozens of Ontario municipalities.
Last week’s meeting included data on the delayed collection of DC payments because of deferral agreements – an issue of concern to developers that is attracting media attention. The eight most recent amounted to more than $9.7 million, with the three largest – Maple Leaf Foods, Canada Bread and Navistar – all obtaining the deferral when they became occupants of the Red Hill business park (formerly the North Glanbrook business park).
The DC stakeholders committee includes four councillors (Maria Pearson, Brenda Johnson, Judi Partridge and chair Brad Clark), as well as two citizens and one representative each from the Hamilton Halton Home Builders Association, the Chamber of Commerce and the Hamilton Burlington District Real Estate Board. Only the councillors and the HHHBA rep attended last week’s meeting.