More subsidies of industrial expansion will add at least half a million dollars a year to taxes and water rates. The proposed subsidy increase is in response to an apparent threat by an unnamed large company that it will relocate to another city if development charges are not reduced.
The change has been proposed by Tom Jackson and Lloyd Ferguson and went through council with no debate. But it must still undergo a public process that is mandated by provincial regulations that require issuing a background study and then holding a public meeting at least 60 days later.
The city staff report on the proposed change has been designated as the background study, and its approval by council on May 9 is considered to have started the 60-day clock ticking. As a result the July 11 meeting of the audit, finance and administration committee is deemed to be the public meeting where anyone can speak in support of or opposition the change.
Currently expansion of an existing industrial facility is exempt from growth fees if the enlargement is less than 50 percent of its original size. But that discount is only available once while the Jackson-Ferguson proposal would allow the exemption repeatedly
“If a developer were to always expand under the 50 percent limit, then they would not pay any development charges,” explains the staff report. “The financial implications of the proposed changes will be dependent on the amount of industrial expansion that occurs. Any funds that are not collected through the Development Charges By-law will need to be offset, either directly or indirectly, from another source (effectively, the property tax levy or water, wastewater and storm rates).”
Development charges are supposed to cover the costs of growth but various provincial restrictions mean that the maximum the city is allowed to collect doesn’t fully pay for the required extra services and infrastructure. In addition, city council can put in place various blanket discounts or exemptions – and these currently mean that over $14 million a year that could be charged for growth projects is not collected.
The water rates budget adopted last December allocated $9 million this year to make up for exemptions and discounts to development charges. The city’s capital budget for 2018 includes $5 million this year and $6 million in subsequent years for the same purpose.
“The city of Hamilton is very generous as it relates to development charge exemptions,” city finance chief Mike Zegarac told a recent committee meeting. “We need to review all twenty-one development charge exemptions.”
One of the largest discounts is for industrial development. Part of that is the current discount for expansions of existing facilities that Jackson and Ferguson want increased. But for all new industrial growth projects, development fees are discounted by forty percent.
This discount policy is intended to attract new industrial development to Hamilton and Jackson’s motion for additional discounts pointed to council’s “Economic Development Action Plan goals to grow non-residential tax assessment and increase the number of living-wage jobs.”
Jackson contended that “the amount of development charges is a major consideration for companies deciding where to expand” and that “there have been instances in the City of Hamilton where industrial development charges have been cited as a barrier particularly in the case of existing industries wanting to expand their operations”.
The city is required to update its development charge bylaw every five years and is currently working on a complete re-write with a target adoption date of July of next year. However, the Jackson motion asks that the change to expansion subsidies should “be put in place as an interim measure.”