Vol. 21 No. 9 • March 5 - 11, 2015 In Our 20th Year Serving Greater Hamilton

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Sprawl Subsidies Set To Continue

by Don McLean
March 13 - 19, 2014
It appears the city has little appetite to relieve taxpayers of millions each year in subsidies for sprawl development. While corporate services staff are suggesting some minor increases in development charges (DC), they also call for continuing steeply discounting industrial growth fees and are facing a battle to even end a policy that has deferred $10 million in payments by developers.

    Reforms to make growth fees more equitable for redevelopment projects and set more realistic charges for greenfield sprawl also appear unlikely to make much headway. And a sharp drop in industrial building permits and anemic growth in residential construction means more pressure to provide even greater subsidies in hopes of reversing these trends.

    The first of three meetings of the city’s development charges stakeholders committee revealed that industrial growth is way down. The presented figures compare July to July periods that show $195 million in industrial building permits a year ago but only $62 million in the first three–quarters of the current period, with permits exceeding $1 million dropping from twenty–two to six.

    Currently the city charges $9.60/sq.ft. for new industrial and commercial development instead of the $15.81 that it’s allowed under provincial rules. Staff are recommending no increase. Burlington rates are climbing to $20.55, but Guelph’s and Brantford’s are lower than Hamilton’s.

    Ontario legislation currently under review prevents municipalities from collecting at least one–quarter of growth costs. In addition, various DC discounts and exemptions approved by Hamilton already shift about $10 million a year in growth costs onto city taxpayers, while $9 million is added annually to water and sewer rates.

    Staff are suggesting that one of the discounts – a 90 per cent reduction in growth fees in downtown Hamilton – be lowered to 75 per cent, either immediately when the new development charges bylaw comes into effect in July, or gradually by 5 per cent a year. An alternative is to charge differential fees based on actual growth costs in different parts of the city as advocated by Pamela Blais, author of the acclaimed book Perverse Cities: Hidden Subsidies, Wonky Policy and Urban Sprawl.

    “The actual costs to develop on greenfield lands are about 80 per cent higher than are those to develop on already urbanized land,” she contends. “Perversely, the more efficient house ends up subsidizing the inefficient house – akin to a smart car subsidizing a Hummer.”

    Hamilton levies uniform fees irrespective of the location or size of new residences not the actual cost of servicing them, so a modest house on a forty foot lot in the lower city pays exactly the same growth fees as a sprawling mansion on a half–acre lot in Binbrook, even though one uses existing infrastructure and the other requires entirely new pipes, roads, schools, etc.

    A “white paper” on the Blais approach is being promised for the next meeting of the stakeholders committee on March 31, but the consultant hired to prepare it is already pouring cold water on the idea. Gary Scandlan of Watson and Associates told last week’s meeting that retrofitting of services for older parts of the city may actually cost more than providing new ones for greenfields. Scandlan is also tasked with preparing the DC background study – something his company does for dozens of Ontario municipalities.

    Last week’s meeting included data on the delayed collection of DC payments because of deferral agreements – an issue of concern to developers that is attracting media attention. The eight most recent amounted to more than $9.7 million, with the three largest – Maple Leaf Foods, Canada Bread and Navistar – all obtaining the deferral when they became occupants of the Red Hill business park. V
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