June 21/06 Report - Part 2 of 3

( 1:32:28 )

6.1.1  Don McLean

"Thanks to the committee for allowing me to speak here today and thanks to committee and council for allowing the opportunity to be on the development charges stakeholders committee over the last 2 year period. It's certainly been an educational process."

Presentation to Corporate Admin on June 21, 2006 - Speaking notes (from McLean)

1. New growth imposes real costs on the municipality - recognized by everyone, hence DCs
2. Provincial rules prevent the city from recovering some of the costs of growth - forcing some costs to be borne by taxpayers
3. There are also generally-agreed upon exemptions such as affordable housing, hospitals, brownfields that mean more costs on shoulders of taxpayers
4. Thus even if the city collects the maximum possible amounts from DCs, the taxpayer will still bear a significant portion of the costs of growth.
5. The updated DC study and report recognizes that we have been charging too little for DCs over the past two years - another burden on existing taxpayers and a benefit to developers
6. THEREFORE council members should be provided with a clear statement of the estimated costs to the municipality of each discount, exemption and phase in, so that councillors make their decisions on the basis of clear and relevant information.
7. One of the proposals is for a phase-in of the commercial DCs. While the amount we are eligible to collect has risen 46% the amount we will actually collect when the new bylaw comes into force next month will actually be 22% LESS. I believe this is unjustified.
8. We don't have any great need of more commercial development - there's only so much money to spend in the community, and too often commercial expansion has meant hardship and store closing in other parts of the city.
9. Note that the new 100,000 square foot Lister Block development proposed by LIUNA is entirely exempt from DCs - a $1.6 million subsidy to LIUNA in ADDITION TO the lease agreement.
10. While I don't support any phase-in of the commercial rates; if council believes a full imposition of the new rates is not desirable, here is an option:
11. OPTION: Only phase in the increased amount. Start with the current rate for July 6, and add 60% of the new rate in the first year; and 80% in the second year, and 100% in year three.
12. In 2004, the eligible industrial charges were 10.97 a square foot. The rate we are eligible to collect on July 6 is $16.02. Today we only collecting $1.60 and staff's proposal is to raise that to $2.58 - or only 16% of the eligible charges. This massive discounting continues to put the city behind the 8-ball when it comes to financing the servicing of industrial business parks.
13. We have heard over and over again about the major challenge facing the city of finding monies to pay for servicing of new business parks. One of the biggest controversies surrounds the financing of the so-called aerotropolis business park.
14. The DCs study shows $130 million in water and wastewater projects to service Mount Hope industrial lands. If we only collect 16% of the eligible DCs, then the taxpayers are going to have to provide $110 million to provide the aerotropolis with these two services alone.
15. For those who oppose the aerotropolis, this is further evidence of its foolishness. But the DC industrial discount rate also presents massive difficulties for those who support the aerotropolis - and virtually ensure that even if the project gets approval, it will be a very long time before it is implemented, if ever.
16. There are two constant refrains around the council table: (a) we have a major budget crisis so we can't afford many things we want and need to do; (b) we have to increase our commercial and industrial assessment to improve our budget picture;
17. If we continue to discount DCs in the current fashion, the budget crisis will get worse, not better because more industrial and commercial assessment will actually put us deeper in the hole.
    
    Samson thanks McLean

Samson : Councillor Mitchell , do you have a question.

Mitchell : Not for Don ( McLean ), just for clarification from staff. I'm a little confused on how this process can be 22% less than if we did it differently. Spiler: I believe Mr. McLean was talking about through the stakeholders committee, the original calculations that came through and the amounts that were attributed to the current development charge period. Subsequently, Joe will comment further on this, or wastewater staff, we looked at project and population projections. We came up to a fair compromise in terms of the amount of the cost of the wastewater plant that was attributable to post-period growth versus current growth. That was the majority of the reduction. There was a few other projects where errors were made by staff and we had to fix those. But the bulk of the reduction was in the wastewater treatment plant and the amount of ??? cost put in this period versus post-period.

Mitchell : My concern is that I don't like seeing the public mislead if it's not true.

McLean : There's confusion in terms of what was asked. I wasn't referring to what Joe ( Spiler ) referred to. I was referring to the development charges on the commercial and if you go to the table which is table 1 on page 4 of the report it shows the % increase column, the last column, and for commercial/institutional/office the % increase is -22%. That's what I was referring to.

Spiler : And that deals with, as I mentioned before, there were several meetings by the development charges coordinating committee and senior staff, and as Councillor Bruckler had mentioned before, the absolute development charge amount for commercial was going to go up to $16.03. And staff, we collectively made a decision that, rather than present such a significant increase, that we would basically start again with the 2 year phase in on the development charge rate.

Rinaldo : And just to remind members of council. This is an incentive for us to attract additional investment. If we impose very punitive development charge rates, in addition to that we will in fact, create a ??? for development not to occur so as you know we're starting from a very low base to begin with for both commercial/industrial and we're recommending that we phase-in and bring it up over time. The decision as to how fast or how slow you phase-in is really up to council. As staff, after consulting with all the affected departments we felt that this was a reasonable compromise in terms of phasing in the increase in commercial/industrial. Mitchell : Thank you Joe and Joe for clarification.

Braden : Unfortunately, I think that when we ask questions, speaking for myself, I get more confused rather than moving ahead. Back to that 22%. I'm on that chart on page 4, I see a line that starts with commercial/institutional/office per square foot, 1 st 5000 square feet, is this the line we're talking about, because I do see on the far right side of that a -22. I need a practical example of a - Weeks Home Hardware in Waterdown is paying now at the rate of something, if it was expanding or if there was a new building. And then I think I'm hearing from the presenter they might be paying less. Now tell me that's not true.

Spiler : The current rate as the slide had mentioned is $9.36. Now the graph deals with, I believe in the table of the report, it deals with what the rate is going to be if there are no amendments on July 6, and at that time, the final year of the 2 year phase-in kicks in and there's a stepped increase. So if you compare the rates, the proposed rate versus if we weren't doing an amendment, yes there is a decrease. However, the current rate today is $9.36, what a developer would be paying today to build, and it will be going to $9.62 with the proposed amendment. But the reason for the 22% decrease is because of the stepped rate increase in the final year it was going to kick-in on July 6 if there were no amendments. So yes, if there were no amendments, the final 100% of the phase-in would kick-in which is higher than what staff are proposing, the $9.62. But if you compare today what a commercial developer is paying versus what he is going to pay under the amended rates it's higher.

Braden : I think I'm getting it . if we weren't having this meeting today, and we weren't going to try to change it, within 2 weeks the rate would be $12.32 because we approved that before. So what the speaker is talking about, compared to that rate, it's 22% less. Spiler : Yes, that's correct. Braden : Appreciate that intervention now. I'll make a comment later.

Samson : Move to the second speaker, Joan Roberts

(1:47:40)

6.1.2 Joan Roberts

"Good morning everyone. My name is Joan Roberts and I'm the 2nd of the citizen representatives on the DC stakeholder's committee. I too want to add my thanks to council and people for the chance to be on this committee. It certainly was enlightening and a steep learning curve that's for sure. And I appreciate the chance to speak this morning."

Roberts comments on 2 things: - the process in which the DCs are determined - and the residential DCs.

"The Process: A Stakeholders Committee I found, is a curious thing. It's made up of a majority who have a pecuniary interest in the outcome, meetings where changes are made but we get to vote on nothing."

"I found the process unbalanced, undemocratic, and not transparent."

"Unbalanced in the composition of the group: 3 representatives from the related business community, with their special interests - Hamilton-Halton Home Builders Assoc, Chamber of Commerce, Hamilton-Burlington Real Estate Assoc, and then 2 citizen representatives."

"Unbalanced in the amount of influence. Prior to the new by-law being passed in 2004, we learned after the fact that 4 private meetings were held with the home builders assoc. During this session, dealing with amendments, another private meeting was held with the same people. As the result of these meetings, discounts in the DCs were proposed. The 2 citizen reps were not invited or welcome at these meetings. And heard about the changes only through an email. No discussion."

". why are these crucial decisions made behind closed doors rather than at the Stakeholders meetings, where everyone can hear and weigh the arguments? Private/secret negotiations are undemocratic and are not transparent and is not the way a city should go about its business."

". I strongly suggest a restructuring of this committee and have some thoughts on how this could be done ."

"Residential Development Charges: A little bit of background: . heard numerous times how new growth pays for itself, that residential development charges cover all the expenses of building new homes. In fact a column in our local daily in Feb. 2003, written by Chris Phillips of the home builders association, was emphatic when he wrote QUOTE "Who really does pay for growth? Let us put that issue to rest once and for all: Growth does indeed pay for itself. Period." UNQUOTE

"At that time, 2003, DCs for single family dwellings were about $7000. Adjacent municipalities were much, much higher, some double and more, but Hamilton was near the bottom . I can tell you today, with certainty, that DCs do not pay for new growth; it is subsidized by the existing taxpayer."

"It was at this time Staff had proposed the new DC be raised to $13,347, including for the first time the stormwater component which was around $2000 at that time. After several private meetings between staff and the homebuilders assoc, which I remarked about earlier, the rate was lowered to $12,589 - a reduction of $758. In June of 2004 the by-law was passed by Council."

"Then the Stakeholders were asked to reconvene to study amendments to the DC by-law. Staff . proposed a move in residential DC to $18,567 in order to cover some of the very substantially increased service costs."

". after a closed door meeting with the home builders assoc. people, another reduction took place. The DC was lowered to $17,615 which is the amount you have showing in your draft proposal today - a reduction of $952 ."

". along with that reduction, you will notice that a phasing in has been proposed, paying only 50% of the increase starting this July and continuing for 6 months before the full amount starts."

"The figures that I have just mentioned are initiated by this municipality so you councillors have the option to make changes."

"On top of those reductions there is an extended list of provincially mandated discounts and exemptions, including a 10% discount on all "soft services". So you can see that provincial rules alone guarantee that growth doesn't pay for itself. Add to that the exemptions and discounts that are in place right now by this municipality and you have a city bearing a huge burden of the costs."

" . someone has to pay for all the expenses of building new homes . it's obvious that the developers have been getting a cut rate price ."

"From their letter you can see that the Home Builders Assoc. is appealing to you on behalf of the new home buyers. They expect and get special privileges. But what I have just shown you is that there are many, many more taxpayers bearing the brunt of additional taxes because of new development, than there are people buying new homes, so what are you obliged to do as an elected representative of the citizens of Hamilton?"

"What I am asking from you today is not only to reject the reduction in the residential DC amendment proposal, and move it back up to $18, 567, but also to reject the phasing in of the new charges. Thank you."

(1:55:45)

Whitehead : There's a number of issues that interest me in regards to transparency. I don't know who to focus on staff to respond but they sound like pretty serious allegations being made here.

Rinaldo : As a far as the development charge process, the development stakeholders committee that we have established, it's very similar to any other stakeholders that any other community uses for development charges. We always invite the affected stakeholders including citizens and that's a similar arrangement that when I worked in Halton, when I worked in other communities that are in use elsewhere. Gary ( Scandlan ) will attest to that.

In terms of the process used for getting input, because as part of the process what we have is the developers, like anybody else, has the right to review every single project that we have included in the development charge study, and you have the right to appeal that to the OMB if they don't agree with the allocation. So when we develop the preliminary studies, obviously the first thing that staff tend to do is when in doubt we charge it to development. So we charge more of it to development. When the detail review of that study was done with the development industry, and that was all identified in the process with the stakeholders group that we were going to do that. They identified some projects clearly that, in our mind, after reviewing it with them and their comments, we thought we would not be able to substantiate before and OMB, and as a result, we've taken some of those water/wastewater projects out, or the allocation . was inappropriate. The big change we did was the water/wastewater budget, and the issue that we had we had allocated it all to the current growth between 2004 to 2024. Clearly a population during that period of time is only 73,000 and the balance of the 718,000 population was going to be in the post period benefit. So what we recommended to council is that we do the proper allocation because if we don't we're going to go to the OMB and we'll lose the appeal anyway. I did advise the committee that I was planning on doing that. I tried to set up another meeting with the stakeholders. Unfortunately Carolyn (Biggs, Clerk) was not able to get a quorum so that I could walk these stakeholders committee through to explain the process. But in my mind the allocation of that is fair, and what we as a municipality can substantiate before an OMB. In terms of the phasing in issue, there's no question that's a policy issue of council. If you decid e that you do not want to accept staff recommendation as to why to phase in the amount, and you'll hear from the development industry in a few minutes as to why their idea why we phase it in because they'll be talking about changing existing agreements with assisting the residents that have bought new homes. You can decide as to whether or not you want to phase-in, but clearly it was not behind closed door meetings. Most of the meetings we had actually were not with developers, were with our own staff to analyze the input that we received from the developers to determine whether or not what the development industry was telling us should have been an inappropriate allocation. It's an issue of assigning the appropriate cost, and you know, it's not a science and there is judgment in there and we want to insure that what we put forward to you is defensible before the OMB.

Whitehead : On occasion you did provide a report to the community council on what you're pulling out. Rinaldo : Yes. Whitehead : And the justification for it. Is that a peer review or did it just happen, making your own determination? Rinaldo : In terms of the allocation, I indicated the big component related to the wastewater budget. If we simply allocated, as I indicated on the presentation, based on the population growth, proportionately between 718,000 population and the 504 the existing population, we did a proportion allocation. Once we get the detailed master plans from Public Works staff, when we do the updates next year, once we have the comprehensive analysis to back it up, and if in fact it needs to be, we will make those adjustments.

Whitehead : Okay. I'd rather collect before and pay back later opposed to lose (?money) and never be able to collect in the future. Rinaldo : Then the option you then is to charge the full amount which is ??? but you'll hear from the - Whitehead : I'm talking about the issues that you've actually pulled off the table, because at first blush you believe there was an argument or that you wouldn't have it put there in the first place. And after having discussions with the development community and with your staff, you realize at an OMB hearing that it wouldn't be defensible. So on that I believe you brought a report to council, just remind me, is that a peer review, your decision, or is that just staff own determination making judgment whether or not OMB would rule in favour of - Rinaldo : The big one was the wastewater plant and we allocated virtually all of it to the growth 2004 - 2024, when clearly the documents showed that the ??? was going to serve 718,000 people, and that's 73,000 of it was there and 93,000; it's simple calculation. You know, that kind of defense, in my mind, you're not going to be able to defend that before a board, when you clearly show that you have a 718,000 population in the next 20 year its 73,000, and the balance is all beyond that. They're going to ask you to allocate that. That's the way the legislation is written, and if we had of had that information from our staff at that time, we probably would have allocated it that way to begin with. Whitehead : I appreciate the clarity. Thanks.

Braden : In your last interchange about alleged meetings. I would like the staff's response, I think, from one meeting, in which it was unfortunate you didn't get a quorum. Is there - I want staff to talk about if in fact there were other meetings, and in fact, who was at the meetings, what department, and whether or not there were politicians involved. I need you to clarify right now. We just heard from one individual there were 4 meetings, and we've heard that in fact one meeting, what about the others if there were others. Rinaldo : I recall there were 2 meetings, right Joe ( Spiler )? Just clarify? Spiler : Yes, that's correct. And also if I could mention, and it's recorded in the minutes there, staff told the stakeholders that any member of the stakeholders that wanted to meet with staff just to contact us and we would meet with them to discuss their issues, assumptions, and anything else that was contained in the information given out to the stakeholders. Everybody had a chance to meet with staff to discuss individually various assumptions that staff made. And when staff sat down to come up with their final conclusions, I mean the consultant that the wastewater people had hired, they were involved in those discussions also. We relied on their input additionally in terms of coming up with the final conclusions.

Braden : One final thing, in regards to these meetings, the ones that were attended by everyone and then the ones that were attended by less than everyone. Was there talk at that particular time about the phase- in or were you talking about the basic numbers at that point?

Rinaldo : Phase in - one of the things that developers had put forward is their inability to collect on properties that they had already signed agreements with existing residents. And that is a policy decision that this council may or may not chose to do so. They have asked us to put forward for their consideration phasing in of the Development Charge Act. We've recommended to do it, given what they're saying, but really that's up to you as a councillor. If you'd rather not phase it in, and you're hearing from the delegation that we shouldn't be doing that, that's entirely up to you. But we are recommending a phase-in, given the impacts it potentially has on the people that actually bought the property.

Braden : When did they raise the phase-in issue first? Rinaldo : When they saw the magnitude of the increase, they raised the issue I believe, at one of the meetings that we had. Braden : Best guess when, please. Rinaldo : Ah - Braden : Last year, 2 months ago, when? Spiler : I'd say about ah - I'd say probably about 3 weeks ago. Braden : Thank you very much.

Roberts : If I may add just one clarification. It's true what Joe ( Spiler) said, we were all offered to meet with staff, but if you meet privately, then it's still undemocratic, it's not transparent and you just continue the same old pattern of not being open and transparent. So that's what I would like to move away from.

Samson : The issue of the phase-in, did that come back to the committee? Rinaldo : We tried to get a meeting together with the Stakeholders Committee and unfortunately we weren't able to get a quorum and - but we did offer to meet with individual stakeholders to explain the rationale for it. No one took us up. Samson : Would they have known the phase-in? Rinaldo : Yes. Samson : Okay. Thank you.

Mitchell : Mr. Chairman I should have tinked my glass first before Councillor Whitehead asked the questions. Joan I want to thank you for your presentation. It was a learning experience for everybody. It was an honour for me to chair the committee and I will say it was very open and I think my councillor colleagues will agree. Councillor Bruckler was on the committee, Councillor Pearson was on the committee, Councillor McHattie was on the committee, and I chaired it. This was the second time that committee has met. Our staff right from the word go explained everything to us, as did Gary from C. N. Watson and it was very much a learning experience, as you heard Joan say. I do not, however, like the accusation that there was closed door meetings or anything because that is definitely not the case. Adi Irani was the representative of the homebuilders and he brought issues forward and he emailed and met with our staff as everybody had that opportunity to do, and the information from the staff was answered and sent out, and everybody had the opportunity to send it back. Carolyn (Biggs) I want to thank you for all the hours of labour to try to get groups of people together to go forward with this. I'm happy with the process. I'd like the process of the stakeholders committee to continue in the future. I think it's very worthwhile to communicate and have everybody understand the process. I do however, take offense to being criticized that this process was not open and fair. I will say maybe it can be improved, but it was as open and fair, and it's embarrassing for me to hear that it wasn't. In the future, timing permitting, the only thing that could have been different is we maybe coulda had a third meeting before coming here. But coming here is the open transparency of the completion of the process. And there may be another meeting after today, I don't know. I'm very interested in hearing what everybody has to say. That's why we're here. So thanks Joan, for her involvement on the committee, but definitely this was open and transparent and I want to thank staff for all the emails and time and effort, and all the members, Adi and so on, and the Chamber of Commerce. It was I think an excellent group and should continue.

Whitehead : Just one simple question. I understand that we've determined that we have a phase-in. That's means we've determined that the real costs are here and they're underpaying - the staff are recommending a phase-in. So that means that for that 2 year phase-in someone is picking up the - Rinaldo : Can I clarify - 6 months - 6 months phase-in. Whitehead : 6 month phase-in? At what point do we get to 100%? Rinaldo : January of '07. Whitehead : ?? Rinaldo : I believe Joan was talking about the residential, so January of 07. Whitehead : Okay. So who's going to be paying that difference? Rinaldo : Obviously any shortfall that we have in that will be picked up by our budget or we will attempt to recover as post period benefit against future growth as well. It's going to be a combination of the 2. Whitehead : I guess the question I'm asking is Will this end up being a levy impact? Yes or no? Rinaldo : It's really difficult to determine but there is a possibility it may have an impact on your wastewater rates, yes. Whitehead : Thank you.

6.1.3  Jeff Young, Losani Homes (Chief Financial Officer for Losani Homes)

(2:09:58)

- represents construction industry - every new home built means 6-7 years of employment created, - Home Builders Assoc employ up to 18,000 people, directly and indirectly - increase in DCs not as simple as "take it out of the developers pocket, they have lots of money" - "Hamilton has taken approach that growth should pay for itself through collection of DCs - represents an unfair financial model which stalls growth and hurts the economy" - (Hamilton) has one of the highest tax rates in the province - this city needs new growth tax base - about levy - Binbrook DCs are higher than Burlington, Mississauga, etc. - when cost of new houses increases, so does the cost of resale housing - impact on first time home buyers - proposed $5000 increase - has ripple effect on construction industry and the economy - "I believe it's somewhere in the neighbourhood of 60 - 90 days to receive the new report, to view it, and accept the findings, . is not sufficient time for open debate and discussion of alternatives." - "asking for more time and for everyone to educate themselves so that we can make the right and most transparent decision possible. Thank you." (2:19:39)

Whitehead : - contradictions within your (Young) presentation: Hamilton has one of the highest taxes - argument is that if development charges are not paying for growth, then all you are doing are increasing those taxes - reconcile that argument - Young : no denial there is a conflict between DCs and the residential tax base. "Only way to battle high tax rates in this city is through growth, and if we continue to increase DC we are therefore impeding growth - how or where is additional tax revenue base going to come from to assist one of the provinces highest taxes? Whitehead : - type of growth is important, Hamilton on the cusp, if not leading, in residential development in south western Ontario - "not a lot of developers hurting in Hamilton with residential development" would you support that statement? Young: Our stats would show that Hamilton isn't among the leaders in housing starts - refers to article in Canadian Business Week re London and Barrie in the lead of housing starts. Whitehead : tracking of residential building permits (in Hamilton) show increases from year to year. "Would you support that statement?" Young : Yes Whitehead : Refers to higher rate DCs in Glanbrook, and asks if that has slowed down building houses there. Young: "starting to impact because of the timing of bringing land on for development - Glanbrook and Binbrook are now considered attractive areas to live - cost of land now equal to Stoney Creek "or anywhere else" - "$7000 surcharge starting to have an impact now that we've used up our residual land." Whitehead asks staff about the status of the 15,000 houses to be built in Glanbrook, and staff respond that about 7500 approved and/or built. Whitehead says "we're halfway there and going at a fairly good pace - I support balanced development but in the context of DCs - most people believe that we can pass on those costs (DCs) to the taxpayers - breaking point on both sides - "can consumer absorb slightly higher rates when purchasing homes versus the burden . of taxation, (mentions poverty rate in Hamilton) - as councillor have to reconcile those kinds of issues - Binbrook with higher DCs has growth exceeding areas in Hamilton with lower DCs. "So your argument that higher DCs will slow things down, so here's an example where it hasn't. How do you reconcile that?" Young : - have held this land in Binbrook for 5-6 years and have been able to mitigate the DCs by having lower land costs, which does not exist today." Whitehead : Thank you.

(2:27:07)

6.1.4 Peter Serrani, President, Hamilton Halton Home Builders Assoc'n.

(2:27:16)

Serrani: - advocate for choice, affordability in housing, - remarks re increase DCs have on homebuyer - Canada Mortgage & Housing predict average house in Hamilton, Burlington, Grimsby area, will be $436,000 - Statistics Canada medium family income in Hamilton area is approx. $64,000 - dream of owning a single family home in this area "will soon be over" - new home in Binbrook priced at $210,000 includes $40,000 made up of taxes, fees, levies and DCs. His message today: "As an industry we have never been opposed to paying our fair share of the cost of growth. I'm here to say that nothing has changed. - others will say "we don't pay enough" - costs are passed on to the consumer - "I am standing here today to present their interest. We have a responsibility make sure that those who do not yet have a voice, are heard" - "our industry provides nearly 18,000 jobs locally ."

(2:31:58)

See Part #3