1. Required content of a…

1. Required content of a community benefits charge strategy: Before passing a community benefits charge by-law, a municipality must prepare a community benefits charge strategy. The strategy must identify the items that a municipality intends to fund through community benefits charge in order to provide clarity about the components of the CBC strategy, similar to what would seen in a Development Charges Background Study.

The concern with #1 above is that there is not the same rigor or detail that there would be in a DC background Study, which is tied to proposed 10 year capital projects related to growth. Very likely that municipal services will or could be enhanced to achieve the full 15% value resulting in an increase in the total amounts payable to the City in municipal charges. When these changes were first introduced the goal was cost certainty and revenue neutrality. It is likely that neither objective is achieved unless there are specific regulations or limitations placed on CBC by-laws. Preliminary estimation on specific projects; with the DC by-law rates with the new services which will not be discounted along with the CBC by-law, the total of municipal costs will increase and not decrease or stay at current levels for new developments.

2. Services eligible to be funded through development charges: Certain services are proposed to be identified under the Development Charges Act to be eligible for full-cost recovery through the collection of development charges and is no longer subject to the current 10% discounts. These services would be ineligible to be funded through CBCs. This includes public libraries, long-term care, parks development, public health, and recreation.

The concern with #2 is that these services are being left in the Development Charge by-law rather than in the CBC by-law and as such part of the 15% maximum. These services should not be part of the DC by-law what was the rational for leaving these services in the DC by-law? Further the 10% funding requirement from the City is removed for these specified services and this can lead to “gold-plating” of these services as the City does not need to contribute. The effect of this will be an increase in the in the Development Charge for these services as a whole that remain within the DC by-law. The likely scenario is that Development Charge rates for the services that remain to be recovered through DC will increase as a result of these changes.

Also as we have seen the City of Toronto for example is looking at a non-residential development charge (IE removing current exemptions), which if approved so that to hotels and other non-residential uses will not be exempted will significantly increase our municipal cost to develop new hotels and any non-residential use.

3. Percentage of land value for determining a maximum community benefits charge: At this time, the proposed percentages of land value that would be prescribed in regulation under the Planning Act would be structured as follows:
o Single-tier municipality – 15%
o Lower-tier municipalities – 10%
o Upper-tier municipalities – 5%
The land value would be calculated as of the valuation date, which is the day before the date the building permit is issued in respect of the development or redevelopment.

The concern with #3 is that the CBC will be charged at the highest land value at the time building permit issuance. This is not consistent with the changes to the DC Act which “freeze” Development Charges at the time of Planning Applications, why are the CBC charge being treated differently than Development Charges?

As a further issue with respect to the DC the Province failed to mandate a maximum interest rate that can be charged on frozen DC payments, this lead to some municipalities imposing a ridiculous interest rate on these "frozen" amounts. The Province should prescribe a maximum interest rate that can be applied to frozen DC at the time of a Planning Application and it should be tied to the Construction Price Index in my opinion. Again the goal of the legislation was for cost certainty this is not achieving that.

Further and more importantly is that the land value for the calculation of the payable CBC by-law should be at the time that the re-zoning is approved rather than at building permit, provided building permits are issued within a certain period from the enactment of a zoning by-law, as an example two years. In that way it allows for cost certainty on a projects which can allow it to move from the approval stage into the Design and Development, allow for the issuance of permits, marketing and construction start in a reasonable time frame with known costs.

The further concern is that unlike previous Park Levy contribution under the Planning Act there was a difference between residential and non-residential rates, being 2% for non-residential and 5% or 10% at the alternative rate for residential. The blanket 15% for a CBC is a significant amount and could not likely be absorbed by many ,if any, non-residential developments. Should municipalities impose the full amount of the CBC by-law on non-residential development the municipal cost would be significantly higher than current costs for these projects. Note the municipalities need not impose the full 15% on either residential or non-residential developments but I do not think they will be able to help themselves. In short the CBC by-law for non-residential developments or portions of non-res in mixed use developments should have a significantly lower percentage CAP.

4. Timeline to transition to the new community benefits charge regime: It is proposed that the specified date for municipalities to transition to the community benefits charges regime would be one year after the date the proposed CBC regulation comes into effect.

No major concern here except that the longer this continues the less clarity on how current applications should be dealt with by the City and uncertainty on municipal costs.

5. Community benefits charge by-law notice: The Plan to Build Ontario Together Act, 2019 amended the Planning Act to establish a mechanism by which a municipality’s CBC by-law could be appealed to the Local Planning Appeal Tribunal. A municipality would be required to provide notice to the public when it passes a CBC by-law. To implement the appeal mechanism, it is proposed that a municipality would be required to comply with a set of notice provisions similar to the notice provisions found under the Development Charges Act when a new DC by-law is passed.

No major issue however there is likely to be many appeals of municipal CBC by-laws which will mean uncertainty in actual municipal costs and payment made which would need to be refunded in part should appeals ultimately be successful.

6. Minimum interest rate for community benefits charge refunds where a by-law has been successfully appealed: The mechanism to appeal a CBC by-law includes a requirement for municipalities to provide full or partial refunds in the event of a successful appeal. The interest rate paid on amounts refunded must not be less than the prescribed minimum interest rate which would be the Bank of Canada rate on the date the by-law comes into force. This proposal aligns with the prescribed minimum interest rate for refunds of development charges after successful appeals under the Development Charges Act.

Should the proposed cap on the interest rate for refunds be the mandated rate applied to frozen DC charges based on Planning application date?

7. Building code applicable law: It is proposed that the Building Code be amended to add the community benefits charge authority to the list of items under Division A - Article 1.4.1.3 Definition of Applicable Law. This amendment would establish a mechanism for ensuring the payment of community benefits charges prior to the issuance of a building permit.

Practically it will be administratively difficult for the municipalities to provide the land value at the time of building permit issuance. They have this issue now with respect to the cash in lieu for Parks. My comment is that the land value that is used to determine the CBC payable at permit issuance should be permitted to be calculated within 6 months of permit issuance.

However as stated above and more importantly is that the land value for the calculation of the payable CBC by-law should be at the time that the re-zoning is approved rather than at building permit, provided building permits are issued within a certain period from the enactment of a zoning by-law, as an example two years. In that way it allows for cost certainty on a projects which can allow it to move from the approval stage into the Design and Development, allow for the issuance of permits, marketing and construction start in a reasonable time frame with known costs.