More financial incentives for growth are being advocated by city staff who believe that already steeply-discounted development fees are not enough to boost Hamilton’s competitiveness, and who contend additional concessions should be made to attract large corporations. On the residential side, fees for new homes are set to climb 27 percent as the city completes the five-year update of its development charges bylaw.
The draft calculation presented this week to the subcommittee overseeing the review would see house builders contribute $35,670 towards servicing costs of a new single family unit – up more than $7500 from the current rates that were set in 2009 and adjusted annually for inflation.
The jump reflects significant increases in the expected spending on a range of city-wide services from roads and recreation to libraries, transit and airport expansion. It will now include a share of parking construction costs and a small amount for the conservation authority to review development proposals.
The jump in airport expenditures was questioned by councillors, but staff assured them it is not to subsidize the aerotropolis. Instead it is to be used to purchase land for new runways and other expansion of the city-owned airport called for in a 2009 study that predicted 9.4 million passengers a year by 2030.
Just over half of the total charges are earmarked for water, sewer and stormwater infrastructure. The sewer portion is actually being reduced because slower than projected growth has allowed the city to delay some expansion of the sewage treatment plant by nearly a decade.
Development charges allow municipalities to recover some growth costs, but provincially-mandated exemptions and discounts mean about a quarter have to be paid by existing taxpayers. Additional cuts are approved by city council for a variety of reasons and these impose a shortfall of about $16 million a year. Water rates are being used to cover $9 million annually, while the rest is made up either by delaying projects or borrowing to top up the development charges account.
The most expensive discounts are provided to industrial developers as a way to out-compete other cities in attracting new businesses. Staff are proposing to freeze the rates at the current level of $9.60 a square foot instead of the $19.65 the city is entitled to collect. Since the latter figure has gone up $3.50, the effect is to increase the industrial discount to 52% from its current 41%.
However, the director of economic development, Neil Everson, contends even the current rate is hurting Hamilton’s growth prospects. He presented charts to the subcommittee showing a drop in both the number and value of industrial building permits issued in the last year. Subcommittee chair Brad Clark suggested the decline might not be limited to Hamilton and asked Everson to provide data from several years and other municipalities.
Departing from the prepared slides, Everson suggested putting a cap on the amount any single business pays in growth fees, a proposal that generated substantial discussion and apparent approval from Clark as well as Judi Partridge and Maria Pearson. Clark expressed concern that the change might be seen as bonusing – a practice banned by the province. The subcommittee voted to invite Everson to elaborate on the capping concept at the next meeting on April 23.
The potential size of the cap was not revealed, but reference was made to attracting more companies like Maple Leaf Foods and Canada Bread. The former was assessed $2.6 million in development charges while the wiener plant fee was almost $3.3 million (both at the earlier rate of $6.65 a square foot). Each company was also granted a deferral putting off the payment of the growth fees for up to 10 years.
Staff are proposing that the 90 percent discount applicable in downtown Hamilton be gradually reduced – by 5 percent a year – to lower taxpayer costs while still encouraging additional investment in redevelopment of the core.
Video coverage of last week’s meeting is available at http://joeycoleman.ca/2014/03/31/development-charges-stakeholders-sub-committee-for-march-31-2014-live-1030am/ thanks to Joey Coleman.