FoNTRA responded to the three reports and recommendations from the City staff re: Growth Funding Tools. The recommendations were passed by the Executive Committee with amendments on July 12, and by City Council on July 19. Please refer to our Growth Funding Tools page for background information and links to the agenda items, by-law, reports and amendments.
Table of Contents
- EX34.1 Growth Funding Tools – Development Charges
- EX34.2 Growth Funding Tools – Community Benefits Charge
- EX34.3 Growth Funding Tools – Alternative Parkland Dedication Rate
EX34.1 Growth Funding Tools – Development Charges
Toronto City Hall
100 Queen Street West
Toronto, ON M5H 2N2
Attention: Julie Amoroso
RE: EX34.1 Growth Funding Tools – Development Charges
Dear Mayor Tory, Chair, and Members of Executive Committee,
We understand that this report responds to Provincial legislative changes to the Development Charges Act and Planning Act (which take effect September 18, 2022) which necessitates the City review and update its Development Charges (DCs). This topic is extremely important to the future of the City and we urge Council to treat its findings very seriously. This means examining the legislative changes introduced by the Province and any proposals for exemptions very carefully (and with caution).
A key principle for growth-related funding tools (GFTs) is that growth pays for growth to ensure services and infrastructure are provided to create complete communities as the City grows. Development charges (DCs) do not fully recover the cost of growth due to legislative restrictions such as statutory exemptions and the development charges (DC) service level cap. The focus of the growth-related funding tools (GFT) review has been on meeting the legislative requirements to bring forward the bylaws so that the City’s financial sustainability is not unduly impacted.
Development charges (DCs) are designed to specifically fund the portion of new capital projects that are needed to serve growth. Toronto is expected to continue as one of the fastest growing cities in North America, projected to grow to a minimum of approximately 3.65 million people by 2051. High levels of growth require comparable levels of investment in infrastructure to serve new residents and new employment. Of the $67.0 billion capital forecast outlined in the development charges (DC) Background Study over the 10 and 20 year study planning period, $14.9 billion (22%) is related to growth and eligible for development charges (DC) recovery. This forecast includes funding for capital facilities and infrastructure, such as roads, transit, water, parks, community centres and libraries, enabling the City to invest in, and provide infrastructure and services needed to serve growing communities.
The level of growth related capital investments outlined in the development charges (DC) Background Study results in a rate increase of 46% for residential developments, and 40% for non-residential developments. Recommended adjustments to development charges (DC) rates reflect updates to the capital programs and upward inflationary pressures on construction costs. The rates presented in the report are the calculated rates based on the development charges (DC) Background Study and reflect the maximum recoverable amounts permitted by the legislation. The City is providing a measured implementation process which balances the impacts on new development by gradually phasing in rate increases over time, while supporting city-building objectives, including investing in infrastructure and services, encouraging the growth in housing supply overall, and supporting the delivery of affordable housing.
The City’s current development charge (DC) exemptions are proposed to continue pending the completion of a comprehensive framework and approach to financial incentives being undertaken with a report back to Council in 2023 to coordinate with the Long Term Fiscal Plan review. As a result of statutory and discretionary exemptions, the City is estimated to forego revenues of approximately $550 million annually, with the largest being the City’s non-ground floor non-residential and affordable housing exemptions, estimated to each have a value of $200 million annually on average. The recommended bylaw policies represent about 55% recovery of eligible growth costs under the Development Charges Act, during the term of the bylaw. The above figures are based on the development charges (DC) Background Study growth forecast and estimates of exempted units and non-residential floor space.
We agree with staff that reducing development charge (DC) revenue sources through exemptions must be carefully considered to ensure that the approach and level of incentives are optimized and aligned to meet policy objectives. Reducing revenues through exemptions merely transfers the cost to existing residents and businesses through higher property taxation user rates and utility rates, or impacts the services provided to existing and new residents.
The key legislative changes to DCs, along with their implications, are listed below.
Improved Cost Recovery:
Municipalities are no longer required to make a 10% deduction to the costs for seven “soft” services, such as parks, housing, libraries, and childcare. While this change represents an improvement to cost recovery, the historic service level cap remains in place, which means that growth costs cannot be fully recovered through DCs.
Changes to Eligible Services:
A prescriptive list of eligible services now identifies what can be funded by DCs, whereas the previous legislation outlined only ineligible services. As a result, two existing services, pedestrian infrastructure and civic improvements, are no longer eligible for funding and must be recovered through other sources, such as the CBC.
We recommend:
- That City Council request Province to reinstate pedestrian infrastructure and civic improvements eligible for Development Charges funding eligibility
Changes to Calculation and Collection Timing:
Effective January 1, 2020, DC rates are “frozen” and calculated based on the date the complete planning application is filed instead of date of permit issuance. DC payments for non-profit housing, rental housing, and institutional developments are now collected in instalments beginning at occupancy.
We recommend:
- That City Council request Province to unfreeze DC rates and reinstate the basis of calculation being on the date of permit issuance rather than the date of complete application.
These changes result in the rates being set earlier and collected later, creating a number of risks for the City, as well as increasing the administrative burden. The DC freeze introduces inflationary risks of costs relative to the frozen rates, while instalment payments create collection and administration risks, as well as cash flow risks. The Province did not provide authority to register DC payment agreements on title on land or grant priority lien status to outstanding DCs added to the property tax roll. The City has adopted interest rate policies, as permitted under legislation, to help offset these risks.
Other changes include new statutory exemptions for Secondary Suites (including laneway suites, garden suites/coach houses) which was approved in 2018 as part of EHON[1].
The ULI report on Multiplexes identified development charges and the current parking requirements as factors which may make multiplex development unprofitable in many instances, and these two issues need to be considered when the EHON OPA is dealt with.
We would caution against making further EHON exemptions, such as for Multiplexes in the absence of information. Consideration for any such exemptions should only be dealt with full knowledge of the foregone revenue and be considered when the Multiplex OPA and implementing zoning by-law is before the new Council in early 2023, so that all matters affecting this portion of the EHON policies are evaluated together as an entity. In that regard it is concerning that on occasion City Council has made arbitrary
changes and allowed exemptions to revenue related policies which were not recommended by staff. A recent case was on June 15 when Council adopted a motion to freeze the application fees for committee of adjustment despite being aware of the annualized $5.6M cost of doing so, and absent a staff recommendation. .
We recommend
- That Executive Committee request staff to report on Development Charges Revenue considerations when reporting on the proposed EHON OPA to the new Council.
Respectfully submitted,
Geoff Kettel
Co-Chair, FoNTRA
Cathie Macdonald
Co-Chair, FoNTRA
[1] Appendix 4 “so that the charges are collected only if the unit is severed from the property within 20 years of the issuance building permit based on the general terms and conditions” http://app.toronto.ca/tmmis/viewAgendaItemHistory.do?item=2018.EX33.3
EX34.2 Growth Funding Tools – Community Benefits Charge
Toronto City Hall
100 Queen Street West
Toronto, ON M5H 2N2
Attention: Julie Amoroso
RE: EX34.2 Growth Funding Tools – Community Benefits Charge
Dear Mayor John Tory, Chair and Members of Executive Committee,
Thank you for this comprehensive report on the second plank of the Growth Funding Tools triad. And like the others the city is the unlucky recipient of arbitrary and short-sighted provincial decision-making.
“The Community Benefits Charge (CBC) is set out in the new Section 37 provisions of the Planning Act replacing the current authority to permit increased height and/or density in return for the provision of a benefit or cash contribution (‘Density Bonusing’), which expires on September 18, 2022. The new Section 37 authorizes a municipality to collect CBCs against land to pay for the capital costs of facilities and services required as a result of development or redevelopment. The City is required to enact a CBC bylaw, supported by a CBC strategy, before it can collect CBCs.
The CBC applies a maximum standard rate to developments that have at least 5 storeys and 10 or more residential units, provided they are not exempt by statute or bylaw, the latter of which may be determined by Council. Previously, Section 37 Density Bonusing was determined on a site by site negotiation, guided by Official Plan policies and Council adopted guidelines. The new Section 37 Community Benefits Charge is based on the appraised value of the land and restricted so that the charge cannot exceed four percent of land value at the time a building permit is issued.
Based on an assessment of applications in the City’s development approval pipeline and projected land values, it is anticipated that the changes to Section 37 will result in the City collecting significantly less revenues than the current Section 37 Density Bonusing approach, notwithstanding that the CBC may apply to a wider range of developments. While the intention of GFTs is that growth should pay for growth, the four percent cap for the CBC is not sufficient to fully offset CBC eligible growth-related capital costs. Based on the growth forecast, the City anticipates it will recover an average annual amount of $70 million each year over the next 10 years through CBCs, before the proposed exemptions and transition discussed in the report. However, the CBC Strategy estimates the City will require upwards of $2.3 billion in CBC eligible net costs over the same 10 year timeframe as a result of eligible development. This leaves the City with a remaining funding gap of almost $1.6 billion”.
Growth-Related Funding Tools – Community Benefits Charge Report for Action
The CBC approach recommended by staff also provides additional incentives for affordable housing programs by exempting in the CBC Bylaw both Housing Now developments, including market units and Affordable Housing units secured through a municipal housing facility agreement from a CBC payment. In addition, complete applications for residential development in the City’s development pipeline that are less than 10,000 square metres will not be subject to the CBC. The above policies that advance City priorities and protect development projects in the pipeline are estimated to further reduce anticipated CBC revenues initially by about $36 million annually.
The new use of 4% cap on land value does not recognise differences in the size of the development. In comparing the Community Benefits Charge (CBC) to the previous Section 37 Density Bonusing, an analysis of the City’s historic development applications demonstrates that had the four percent cap on land value been in effect over the past five years, the benefits secured as a result of Section 37 of the Planning Act would have been reduced by $50 to $70 million, or 40% annually.
FoNTRA’s comments are as follows:
Basis of the charge
- We regret the elimination of the “Density Bonus” basis of the Section 37 charge. The Section 37 Density Bonus was perhaps a token, but tangible recompense to the City related to development that exceeded what was allowable under the Official Plan and zoning bylaw. This change appears to increase even further the incentive for developers to seek developments that exceed the City’s Official Plan policies and zoning bylaws – now only the Ontario Land Tribunal provides a (mostly delay) obstacle!
How the change was enacted
- We object to the lack of effective consultation employed by the Province in making these changes – we objected (in writing) both as FoNTRA and as a member of the Federation of Urban Neighborhoods – to no avail.
CBC 4% Cap
- We are very concerned about the reduced revenue resulting from the change and its implications – which are unknown! We recommend:
- That Council request the Province to increase the 4% cap tied to the size of the project. (Perhaps through the City of Toronto Act as the funding shortfall appears to be more of an issue in Toronto than elsewhere)
Continue to Address Local impacts
- We believe that despite the basis of the calculation lacking a relationship to the development (being based on assessed value), Section 37 CBC should continue to address local impacts of development.
- Growth areas like Davisville or Yonge/Egllinton require capital investment in additional parks and local services to make life livable for the current and future residents of those communities.
- While development charges pay for infrastructure improvements required by growth (like water purification and distribution, sewers, and transit) that by their nature are not purely local, CBC levies should be allocated to local improvements that benefit the developments that pay those levies. We recommend
- That Executive Committee recommend to City Council that CBC continue to be allocated to capital investments in local areas affected by development projects, and that staff report back in 2023 regarding implementation details.
Existing Section 37 Funds
- The former Section 37 (Density Bonusing) faced criticism for being non transparent both in the negotiations to reach the amount and its allocation, and in the record keeping. As these accounts will continue for several years, (plus the new CBC funds) the issue still needs to be addressed. We recommend:
- That Executive Committee request the City Manager to report back to Executive Committee in the first quarter of 2023 regarding the status of the existing Section 37 (density bonus) accounts, by Ward, and how public transparency can be increased regarding the status of the accounts, and the purposes for which they will be allocated.
Exemptions
- The staff recommended strategy does include exemptions. While the proposed exemptions for housing with municipal funding agreements and transition- development pipeline seem reasonable we would be very concerned about additional exemptions, such as for small private projects.
Respectfully submitted,
Geoff Kettel
Co-Chair, FoNTRA
Cathie Macdonald
Co-Chair, FoNTRA
EX34.3 Growth Funding Tools – Alternative Parkland Dedication Rate
Toronto City Hall
100 Queen Street West
Toronto, ON M5H 2N2
Attention: Julie Amoroso
RE: EX34.3 Growth Funding Tools – Alternative Parkland Dedication Rate
Dear Mayor John Tory, Chair and Members of Executive Committee,
Toronto’s park system plays an essential role in supporting a healthy, equitable, competitive and livable city, and helps to make communities more resilient to contemporary challenges, from climate change to COVID-19. Meanwhile the parkland provision per capita is declining.
This report recommends a phased approach to the consideration and implementation of a new alternative parkland dedication framework, including interim re-enactment of the City’s current alternative parkland dedication by-law in 2022, continued engagement on staff’s proposed approach and analysis of the impacts of Bill 109’s legislative changes through early 2023 and presentation of a new by-law in the second quarter of 2023.
In accordance with provincial legislation, the City must adopt a parkland dedication by-law before September 18, 2022, to be able to apply an alternative parkland dedication rate. The Planning Act’s standard parkland dedication rates of 5% for residential uses and 2% for non-residential uses remain unchanged as a result of provincial legislative changes.
We support the key recommendations in the staff report:
- That City Council direct the General Manager, Parks, Forestry and Recreation and the Chief Planner and Executive Director, City Planning to continue stakeholder and public consultation on an updated Alternative Parkland Dedication Rate, including continued consultation on a density-responsive alternative parkland dedication approach and parkland need in the context of Bill 109’s changes to the Planning Act and report back with final recommendations in the second quarter of 2023.
That City Council amend the Official Plan substantially in accordance with Official Plan Amendment 588 City-wide Alternative Parkland Dedication Rate, in Attachment 1 to this report
There are two major issues related to Bill 109, passed in April 2022
- Rate basis
The alternative rate that can be applied to developments that have been designated by the Province as “transit oriented communities” (TOC), introducing new rate caps based on site size.
- Designated TOC developments on sites of five hectares or less would have an alternative rate cap of 10 percent of the land or its value as compared to 15% for sites between one and five hectares under the current alternative rate, and
- Such development on sites greater than five hectares would have a cap of 15 percent as compared to 20% under the current alternative rate.
This is a reduction of up to 33%, or one-third, of parkland dedication revenue on sites that will be developed with Alternative Parkland Dedication Rate high density projects.
Transit Oriented Communities are at higher densities so should have higher – not lower – parkland requirements.
We strongly agree with the report that this change runs contrary to the intended policy shift to a density-responsive parkland dedication framework by maintaining a site-size based approach to parkland dedication that does not recognize that it is the growth proposed by a development, not the size of the property, which generates demand for parkland and places pressure on existing park spaces.
Therefore we recommend:
- That the City request the Province to eliminate the reduced parkland requirements on lands designated as Transit Oriented Communities.
- Encumbered parklands
Bill 109 legislative changes require the Province to identify encumbered land in a TOC development (e.g. lands subject to an easement or with below grade infrastructure) that shall fully count towards the requirement for public parkland. In accepting encumbered land towards parkland dedication, the City will face challenges with the design, maintenance and operations of these spaces. For example, a park delivered above a below-grade parking structure can have ongoing and significant maintenance requirements, and may be limited in the types of tree planting and programming that can be supported. This will result in higher operating costs, reduced programming opportunities, and challenging urban tree conditions.
We agree there are several challenges with encumbered parklands. However given that as the density of the City increases, park space is increasingly needed, yet may only be available though encumbered lands. Parks may need to find ways to make this work[1].
If encumbered park dedications are to be accepted, they require long-term agreements on title requiring a property owner to restore above-grade park space (including treea) that may have to be temporarily removed at a future date. In addition, trees require root space. Encumbered park space must require adequate below-grade “soil boxes” sufficient to allow for large mature trees, not just small ornamentals. (NOTE: This should apply to street trees, too.)
These are considerations that need to be taken into account in the report on alternative park dedications that is to be forthcoming in 2023.
Recognizing that the encumbrance reduces the value to the community and the long term costs to the City of such park space, the required parkland dedication should be increased to compensate for the encumbrance. Therefore we recommend:
- That Executive Committee request that staff investigate the challenges and the implication of encumbered park land and report back in 2023 as part of its report back on Alternative Parkland Dedication rates
Respectfully submitted,
Geoff Kettel
Co-Chair, FoNTRA
Cathie Macdonald
Co-Chair, FoNTRA
[1] Note in Deer Park, the One Delisle project will allocate a new large park over two parking garages and at Yonge and St. Clair the Wittington project is the same. Note also the proposal to deck over the Davisville track and yard.
Photo: Fabian Roudra Baroi, CC BY-SA 4.0, via Wikimedia Commons
