Defused

Staff guide council around potential legal challenge and extend discount to development charges

Council sidestepped a landmine of its own creation last week with a large assist from its finance chief. While the County remains uncompetitive in attracting residential builders, council avoided making the problem worse—and possibly avoided a legal challenge. That counts as a good week at Shire Hall.

HOW WE GOT HERE
Earlier this month, council ordered an extension to the discount applied to development charges—the fee homebuilders pay to cover the cost of growth as it affects services such as libraries, parks and emergency services.

The County came very late to the development- charges party. Since 1997, the province has empowered municipalities to collect fees to ease the strain new developments and growing population are putting on their services. Development charges were devised as a means to apportion the cost of growth to those for whom services were being expanded, rather than existing taxpayers.

But the County didn’t get around to looking at development charges until 2007. When it imposed these charges in 2008—along with uniform connection charges—council knew it was pricing the County at the top end of the range for municipalities in Ontario.

Three factors argued in favour of these extravagant rates. First, the County’s new home construction sector was humming. The County was a popular destination and more new homes were being built each year. Second, there was the sense that the County had missed out on these fees for a decade and that this had damaged the municipality’s finances. Aggressive development charges, in combination with eye-watering connection fees seemed a low-risk way to correct this tardiness. Finally, the County was advised, by its consultant, that other municipalities—particularly those in the nearby region—would be revising their very-low charges higher in the near future.

But each of these arguments proved faulty. Almost immediately after the County enacted its development charges and connection fees, credit markets around the world froze solid—very nearly toppling the global banking system. Real estate markets collapsed. By 2010, the County was seeing a third of the new home starts it had enjoyed before the crash.

As housing starts dried up, so did growth in the tax base. For years, the County had been able to mask the actual increases in the tax levy by offestting it with the growth in the tax base. But fewer new homes meant a smaller stream of new revenue.

Other municipalities responded to the drop in new home construction in their markets. Some immediately created discounts to stimulate growth. Others, including Quinte West and Belleville, ignored the advice of their consultant, refusing to put new burdens on the struggling new home construction sector in their communities.

As it became evident that neighbouring markets had managed to stabilize residential construction in their communities, while the County’s new home starts continued to slide, Council was forced to act.

CONCEDING TO MARKETPLACE REALITY
Council relented in 2013. It agreed to reduce development charges from $7,382 for a single detached home to $5,946—a 24 per cent discount. (Last year the discounted fee rose to $6,067).

Connection charges—fees payable for the privilege of becoming a customer of the water and wastewater utility—have risen sharply since then, however. In 2013, it cost $8,443 to hook up to the municipal waterworks system. Last year, it cost $12,295.

Taken together, a new single detached home incurred $18,362 in development and connection charges last year. Even with the discounted development charges, the County’s fees are more than double the amount charged in Belleville and QuinteWest.

If council had allowed the discount to expire on March 6, these charges would have been more than $21,000, compared to about $9,600 in Belleville and $7,700 in Quinte West.

CLEANING UP THE MESS
Earlier this month, council agreed to extend the discount past the March 6 expiry date. It will look at the broader issue of the County’s competitiveness to new homebuilders later this year or next.

But council was advised that new provincial legislation prevented it from changing the development charges bylaw without a background study and public notice. The earliest it could enact a new bylaw—extending the discount— was mid-April. This meant a window of about six weeks of exorbitant charges. Council balked at the constraint the province had imposed upon it, and chose to flout the rule and extend the discount anyway.

In the intervening days, the County’s finance chief, Susan Turnbull, worked to extract council from its selfmade pickle. Last week, she proposed that the County’s building department could continue to issue building permits—invoking development and connection fees— but they would not be payable until after the new development charges bylaw was passed and adopted. In this way, building would continue, the discount would, in effect, remain in place and council might avoid a costly legal fight.

Mayor Robert Quaiff cheered Turnbull’s fix.

“I appreciate the extra effort,” said Quaiff. “Brilliant. This allows us to keep our commitments to the builders.”

Quaiff says he will soon announce details of plans to form an ad hoc committee of builders, residents and council members to figure out how best to position Prince Edward County in the regional new homebuilding sector.