Too much, too late

Are development charges killing new home construction in the County?

Did the County overshoot when it finally adopted development and connection charges over the last couple of years? That is the question that is likely to be debated more urgently in the next weeks and months as the crashing new home market begins to claim more local jobs.

At stake are potentially millions of dollars that could be pouring into municipal coffers to be used to fund the expansion of services and infrastructure. But if builders choose not to build in the County because development and connection charges are out of whack with neighbouring markets, there won’t be any new construction on which to charge fees—or for that matter, collect taxes.

The County only adopted development charges in 2008, well after most jurisdictions in the province had already done so. Connection charges followed the next year.

Together these charges amount to $14,512 for a typical detached home upon the issuance of a building permit. Compared with the greater Toronto region Prince Edward County’s development fees are low. In Oakville, development charges for this kind of home are $50,468. The average in GTA is about $30,000.

But virtually every other jurisdiction in North America charges much lower development charges. In the greater Vancouver area development charges are $7,475. In Calgary development fees work out to $1,425 for a typical home. In the U.S. the national average for development charges is $8,328.

Closer to home Prince Edward County’s development charge are much higher than its neighbours. In Quinte West, development charges range from $3,000 to just over $4,067. In Belleville the city captures both development and infrastructure expansion charges in one fee totaling $6,692—less than half that charged in the County. Napanee charges just $2,927— the lowest in the region.

As it worked through the process to determine the appropriate level of development charges, the County was advised that it was pegging its rates well above those charged by its peers in the region—but that the neighbours would soon catch up. It didn’t turn out that way. Now nearly three years later that prediction has proved false.

Quinte West underwent a similar development charge review process last summer with the same consultancy employed by the County. That municipality was urged to push development charges to a level on par with the County. So far Quinte West has not taken this advice. Instead it will hold a public meeting later this month seeking guidance from the community.

In the meantime local builders are choosing to build there rather than the County.

Council signaled its concern about the impact of development charges at a meeting of a committee of council last week. It was the first such second guessing of these charges since enacting them in 2008. At issue was an automatic increase of 1.6 per cent to the development charges. When the bylaw was adopted, council agreed to index development charges based upon the Construction Prices Index as a means to ensure the charges remained in line with the expected growth of the housing industry.

As such the annual increase isn’t subject to council approval but was included in the agenda merely as notification to council.

That didn’t stop several councillors from trying to hold back the increase.

Sophiasburgh Councillor Kevin Gale said development charges were sending builders out of the County.

“Several have told me they won’t build in the County because they can’t afford the charges,” said Gale. “I know we adopted these charges 10 years too late but our timing could not have been worse. Before this ship hits the bottom of the lake—we need to take action.”

Gale’s seatmate in Sophiasburgh, Terry Shortt agreed.

We are in a competitive market with Quinte West, Belleville and Napanee,” said Shortt. “And building is in decline here. We have to take another look at this.”

The County’s finance chief, Susan Turnbull, staged a spirited defence of the charges bylaw urging council to maintain them at what she termed are “progressive” levels.

“We have to show leadership,” said Turnbull. “Every time I talk to municipal financial managers this issue comes up. Our neighbours have made different decisions than we’ve made— this is true. But this is where we need to go. It is one of the tools we have to relieve the pressure from the taxpayer.”

But Mayor Peter Mertens countered that “there is no tax advantage if builders don’t build new homes here. There is a market reality that we can’t ignore.”

Turnbull cautioned council that it was just two full years into its development charges bylaw and that any changes might trigger the need for a full blown study and the costs associated with that.

Mertens pressed for a report to identify options. Others wanted to see comparable charges from neighbouring municipalities.

Yet others wanted to leave the issue alone. “What are we doing?” asked Ameliasburgh councillor Dianne O’Brien. “We should just leave it.”

But Turnbull assured the councillor from Ameliasburgh that it would be worthwhile for council to understand the options as well as the rates charged by neighbouring municipalities. Council voted for the report.