Hotel levy breaks will near $900K
With a 40 per cent subsidy of off-site levies for new developments, three planned hotels mean taxpayers would cover $881,000 of the $2.2-million charges
A city subsidy meant to help spur development in a sluggish economy could see taxpayers pay nearly $900,000 of utility and road fees for three new hotels proposed in the south end of the city.
Off-site levies collect money from developers to help the city pay for major roads, sewer and water lines to property.
Since 2014 city council has offered to cover 40 per cent of the fees charged on a per hectare basis, which was extended when a majority of council said building costs within city limits needed to be competitive to encourage new construction.
With a relative commercial building boom underway of 27 acres of southside land, the News calculates the break will total $881,000, to be paid for out of general tax revenue or by city-wide utility rate setting.
Mayor Ted Clugston told the News the amount seems like a big number but new development is a key priority.
“You don’t pay unless the development occurs but that’s a double edged sword,” said Clugston, stressing that the three hotels could add up to $50 million or more in new construction activity.
“It’s something that we really were hoping would happen. I get a call every day from someone telling me that we need to cut taxes to attract businesses.”
Council members have often said economic development is a key priority and voted in 2015 to extend the blanket 40 per cent subsidy through 2017 while setting it at 90 per cent in certain areas of the city.
Last year however, the city adopted a plan to address a $24-million budget gap caused by low energy profits, by seeking a wage freeze, cutting budgets, closing facilities and raising fees and taxes.
This year’s 40 per cent subsidy would fall to 30 per cent next year, then disappear entirely, with developers charged full amounts in 2019 unless it is again extended.
A general off-site rate adjustment based on mandated cost estimate updates went before city committee this week, sparking debate about support for local economy.
Coun. Julie Friesen said she was concerned with how this year’s annual increase — an average of 6 per cent — would affect projects.
“We’re experiencing a very slow comeback from an economic downturn,” she said. “We’re in the Financially Fit era but I wouldn’t want to jeopardize that (recovery).”
Coun. Les Pearson said Medicine Hat’s rates need to be considered beside nearby rural jurisdictions with lower off-site costs.
“It’s all about comparative costs and where we’ve provided an assist, it’s kept us on track,” he said.
Coun. Robert Dumanowski says most jurisdictions are moving toward a developer pay full cost model.
“There’s always a debate about what’s the right time (to remove the subsidy),” he said. “At some time we have to consider it.”
During off-site talks in 2012 and 2015, the Medicine Hat Chamber of Commerce advocated a number of options to lower costs for developers.
On Wednesday, the group’s executive director Lisa Kowalchuk attended the committee meeting and said keeping Medicine Hat’s building costs attractive is key.
“The conversation happens about after 2018 and where the rates are after that,” she said.
The group would not comment on specific developments, she said.
In the south end, a 17-acre land deal between the city and Canalta Hotels is set to close in July, with a hotel and other buildings planned for the site near Strachan Road.
Two other recent private land sales in the area, totalling about 10 acres, will see the Braemar hotel management group and Sun City Hotels move ahead with plans.
The area’s proposed 2017 off-site rate is $204,000 per hectare ($81,600 per acre), bringing the total pre-subsidy charges to $2.2 million.
Of that, a 40 per cent municipal assist would total $881,300, to be covered out of general tax revenue for roads and storm sewers, as well as water and sanitary sewer utility rates.
The developers’ total of $1.3 million would be due during the permitting process.
This week’s suggested adjustment is the result of cost projections and timing of projects, inflation forecasts and other minor adjustments.
Overall, the average weighted rate per hectare would rise by about 6 per cent over last year’s levels, though administrators point out, after a reduction in 2016, the proposed rate is two per cent above the 2015 figure.