Cutting growth subsidies
The city has an opportunity to slash the growth subsidies it gives to developers that have exceeded $200 million over the last eight years. This week councillors agreed to start work “at an appropriate time” on a new development charges bylaw and specified the hiring of the consultant who has done the background studies since 2004.
The staff recommendation to retain Watson and Associates without a competitive process is very early because the new bylaw isn’t required until June of 2024. The actual work won’t begin until 2023 after a new council is chosen in next fall’s city elections and won’t be finalized until June 2024.
Under questioning by Maureen Wilson, staff acknowledged that they only know of two companies in Ontario who do this work the other being Hemson Consulting. They argued that Watson is the best choice because they’ve done all the recent background studies in Hamilton and because some of the work will overlap with another Watson study already underway for the city.
Hemson recently completed a study that "found it now costs the City of Ottawa $465 per person each year to serve new low-density homes built on undeveloped land, over and above what it receives from property taxes and water bills,” reported CBC in late September. “On the other hand, high-density infill development, such as apartment buildings, pays for itself and leaves the city with an extra $606 per capita each year.”
Wilson was the only councillor who queried the staff recommendation before it was adopted unanimously by the audit, finance and administration committee on October 21. Committee chair Lloyd Ferguson abandoned his consistent opposition to sole-source contracts and supported the decision.
Development charges are supposed to ensure that growth pays for itself, and covers the costs of servicing new residential, commercial and industrial expansion. However a report released earlier this month revealed that various exemptions and reductions from the growth fees between 2012 and 2020 have left existing Hamilton taxpayers on the hook for $202 million, including over $40 million in each of 2019 and 2020.
The city currently adds about $16 million a year to property taxes and water rates to make up for the exemptions, but so far that has only covered about half of the accumulated shortfall. Council grants multiple exemptions and reductions that include social housing, hospitals and university buildings, but most of the shortfall comes from industrial and commercial expansion and new construction in downtown Hamilton.
A revised development charges bylaw could see further recognition that greenfield development is far more costly than construction in the parts of the city that already have roads, pipes, fire stations and other city infrastructure in place. Some cities require much higher fees for the greenfield projects, but instead Hamilton has addressed the cost differences by reducing fees for infill growth by as much as 90 percent.
That approach has been the biggest cause of the shortfall in fees that then have to be covered by existing residents and businesses. This began to be modified in the 2019 bylaw that set higher growth charges for water services in suburban areas than in older parts of the city. That made greenfield fees about $10,000 higher for single-family residences and $7000 less for each new apartment unit.
The 2019 changes also ordered that downtown fee reductions be reduced from 70 to 40 percent starting in 2020 but the volume of central city growth still resulted in a $8 million shortfall that year. Another $19 million was added to last year’s shortfall by 45 percent reduction for industrial development.
But the fees for other services such as roads were not separated out. Councillors like Wilson, Danko and Clark contended that omission meant sprawl development isn’t actually paying its way and still enjoys a significant financial advantage.
