In response to pleas from developers, city council has agreed to delay increasing growth charges on new residential development and forego over $7 million that will now have to be made up through property taxes and water rates. And a 60 percent discount on fees for new industrial development has been extended that will also have to be covered by other city revenues.
The residential development charges (DCs) were set to rise this month by $6900 to cover new roads and pipes and other servicing but now won’t start until January when half the increase will be applied, with the full charge not in force until July 2015. Staff estimated the delay will reduce city revenues by about $7.3 million assuming that the equivalent of 1500 new houses will be built over the next year.
“Phasing in the increase to the residential DC would potentially result in a significant level of exemptions that would need to be funded from non-DC sources,” warned the staff report. “For every 100 homes that were built if the rate were to continue at $28,095 versus $34,974, the City would need to fund another $687,900 in exemptions from the tax and rate budgets.”
Nando De Caria, the president of the Hamilton Halton Home Builders Association, told councillors that developers support the validity of the increase that was endorsed by a stakeholder committee on which the HHHBA sat, but that they wanted delayed implementation in order to avoid passing on the increase to new homeowners who have already committed to buying.
“We have no problem of growth paying for growth,” he assured councillors. “Where we don’t agree is where there’s too much burden of the growth that’s being passed on to the new home buyer.”
The staff report notes that if the entire increase is passed on to house buyers, it would add about 1.5 percent to the cost of the $450,000 average price of a new single family home. Staff’s verbal presentation to councillors also explained that building permit applications received by July 6 would still pay the old rates even if the application wasn’t approved until January, and that site plan applications filed by May would get the same deal.
The first public draft of the DC increase released in March anticipated residential development fee increases that were $700 higher but that was gradually pared down. City staff started meeting with the HHHBA about the DC changes as far back as mid-December.
Ontario law permits cities to charge development fees that cover only about 75 percent of the costs of new growth. Municipalities can further reduce these fees through various exemptions and discounts, steps that have lost Hamilton more than $70 million over the last five years.
A revised DC bylaw must be adopted every five years with the next revision scheduled for 2019. Its preparation in Hamilton is mainly the work of a consultant overseen by a stakeholder committee composed of four councillors, two citizens and three representatives of development interests including the HHHBA. The committee met four times since March and there were an additional 12 private meetings between city staff and the HHHBA.
Approval of the delay in collecting residential DC increases was moved by Clark and adopted without opposition at the general issues committee last month. At the subsequent council meeting Clark moved to also delay increases in industrial development charges and maintain the rate at just under $9 a square foot, go to $10.20 in January, and not impose the $11.42 recommended by staff until July 2015. Six councillors voted against that change – Chad Collins, Scott Duvall, Tom Jackson, Brian McHattie, Sam Merulla and Bob Morrow.
The latter charge will still be nearly a 40 percent discount on the $18.76 that the city could be collecting for large new industrial development. A new discount rate introduced this year sets an $8.57 rate for new industrial developments under 10,000 square feet.