City may hike levies For development
The city of Toronto is considering almost doubling the fees it charges developers for construction projects, a proposal that already has the building industry warning it will only result in higher costs for homebuyers.
The recommendation is contained in a staff report set to go to Mayor Rob Ford’s executive committee Tuesday, some details of which were released on the city’s website.
Staff propose an across-the-board hike on development charges levied on different-sized residential units, so that the fee to build a large apartment with two or more bedrooms would jump 86%, to $23,036 from $12,412 by next July.
development charges are onetime fees that are meant to help pay for new or revamped infrastructure necessary to accommodate the burgeoning population. The city has more than $12-billion worth of development-related infrastructure projects it plans to undertake over the next 10 years, on everything from transit to libraries, police and parks.
Toronto has the lowest development charges in the Greater Toronto Area, with most municipalities demanding rates double that of the city.
Staff recommend phasing the increase over two steps, so that a large apartment rate would jump to $17,724 in February, if approved, before settling on the final amount.
One-bedroom and bachelor apartments would go to $12,192 a unit from $8,356 in February and $16,027 in July 2014, according to the proposed bylaw.
The city also proposed increasing the non-residential development charges, which are slapped on storefront retail, by 32% per square metre. The city currently doesn’t charge for commercial buildings or large scale industrial.
Roberto Rossini, the chief financial officer, was unable to comment on the report on Monday, but he alluded to increases in a recent interview with the National Post.
“The development Charges Act is very prescriptive in how you calculate a development charge, and it has to be supported [with documentation]. There’s an arithmetic to it,” Mr. Rossini said then. “What we try to do is make that number [approach] what we call full cost recovery, where development pays for itself. Could [the charges] double or grow significantly? That’s always a possibility.”
Councillor Peter Milczyn, chairman of the city’s planning and growth committee, was one of several city councillors who acknowledged that development charges have to go up — the question is by how much and how quickly.
“They have to increase, but we have to be careful how we implement the increase. What many people assume is the developers pay. Well, the reality is purchasers pay,” said Councillor Milczyn, a member of the executive committee. He expects that city staff will want to start charging commercial and large-scale industrial developers.
“The city is looking at new revenue sources ... some adjustments are necessary,” agreed Councillor denzil Minnan-Wong, chairman of the public works and infrastructure.
Frank di Giorgio, the budget chief, said the city has to be mindful of the negative impact that higher development charges could have on sales, resulting in lower revenue to the city.
Councillor Adam Vaughan, a downtown city councillor who has seen a flurry of skyscrapers move into his ward, agreed some sort of increase is warranted, but it will have implications. “The market is starting to slow; it may grind it to a halt,” he added. “On the other hand it could also take some of the air out of the bubble, it might prevent some of the collapse.”
Paula Tenuta, vice-president of policy and government relations with Building Industry and Land development Association (BILd), predicted hikes as proposed will “affect the affordability” of home purchases and make building in Toronto more difficult.
“We’re quite surprised at the increase,” she said. “What we’re reminding city council is that it’s an added burden onto the new homeowner. And it’s at a time right now where … economic conditions are not at the best of times.”
Ms. Tenuta said first-quarter sales from last year to now are down an average of 40% to 55%. The conditions for buying a home now are that much more difficult, she said.
“It’s hard for us to swallow this. It’s harder for the new homebuyer to have to swallow this. At the end of the day, they’re the ones that are going to have to pay for it.”
BILd suggests that the city consider property tax increases instead.