DEVELOPMENT CHARGES ACT, 1996 / LOI DE 1996 SUR LES REDEVANCES D'AMÉNAGEMENT
MINISTER OF MUNICIPAL AFFAIRS AND HOUSING
URBAN DEVELOPMENT INSTITUTE/ONTARIO
GTA MAYORS AND REGIONAL CHAIRS
C.N. WATSON AND ASSOCIATES LTD
GREATER TORONTO HOME BUILDERS' ASSOCIATION
HAMILTON HOME BUILDERS' ASSOCIATION
TAXPAYERS COALITION BURLINGTON
CONTENTS
Monday 24 March 1997
Development Charges Act, 1996, Bill 98, Mr Leach /
Loi de 1996 sur les redevances d'aménagement, projet de loi 98, M. Leach
Ministry of Municipal Affairs and Housing
Hon Al Leach
Mr Norman Manara
Ontario Library Association
Mr Greg Hayton
City of London
Mr Grant Hopcroft
Urban Development Institute/Ontario
Mr Stephen Kaiser
Orlando Corp
Mr Philip King
GTA/905 Healthcare Alliance
Ms Virginia McLaughlin
Dr James Armstrong
GTA mayors and regional chairs
Mrs Hazel McCallion
Mrs Ann Mulvale
Peel Region Hospitals
Mr Richard Dixon
C.N. Watson and Associates Ltd
Mr Cameron Watson
Lebovic Enterprises
Mr Lloyd Cherniak
Greater Toronto Home Builders' Association
Mr Stephen Dupuis
Metrus Development Inc
Mr Fraser Nelson
Hamilton Home Builders' Association
Mr Peter Goldthorpe
Mr Adi Irani
Mr Ward Campbell
Oakville Chamber of Commerce
Mr Andres Paara
Mr Joe McAuley
Stamm Economic Research
Mr Garry Stamm
Taxpayers Coalition Burlington
Mr Ray Rivers
York County Hospital
Mr Terry Kuula
Dalerose Corp
Mr Ted Bryk
Monarch Construction
Mr Mike Bryan
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Président: Mrs Barbara Fisher (Bruce PC)
Mr DominicAgostino (Hamilton East / -Est L)
Mr John R. Baird (Nepean PC)
Mr MarcelBeaubien (Lambton PC)
Mr DavidChristopherson (Hamilton Centre / -Centre ND)
Mr TedChudleigh (Halton North / -Nord PC)
Ms MarilynChurley (Riverdale ND)
Mr Sean G. Conway (Renfrew N / -Nord L)
Mrs BrendaElliott (Guelph PC)
Mrs BarbaraFisher (Bruce PC)
Mr DougGalt (Northumberland PC)
Mr PatHoy (Essex-Kent L)
Mr BartMaves (Niagara Falls PC)
Mr John R. O'Toole (Durham East / -Est PC)
Mr Jerry J. Ouellette (Oshawa PC)
Mr Joseph N. Tascona (Simcoe Centre PC)
Substitutions present /Membres remplaçants présents:
Mr TonyClement (Brampton South / -Sud PC)
Mr BernardGrandmaître (Ottawa East / -Est L)
Mr ErnieHardeman (Oxford PC)
Mrs MargaretMarland (Mississauga South / -Sud PC)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr MarioSergio (Yorkview L)
Clerk / Greffier: Mr Todd Decker
Staff / Personnel: Mr Ray McLellan, research officer, Legislative Research Service
The committee met at 0936 in the Ramada Inn and Convention Centre, Oakville.
DEVELOPMENT CHARGES ACT, 1996 / LOI DE 1996 SUR LES REDEVANCES D'AMÉNAGEMENT
Consideration of Bill 98, An Act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth / Projet de loi 98, Loi visant à promouvoir la création d'emplois et à accroître la responsabilité des municipalités tout en prévoyant le recouvrement des coûts d'aménagement liés à la croissance.
The Chair (Mrs Brenda Elliott (Guelph): Good morning, everyone. I'd like to call to order the first day of our public hearings for Bill 98.
Our first order of business this morning is approval of the subcommittee report. Could I have a motion, please, from Mr Young.
Mr Terence H. Young (Halton Centre): I move adoption and approval of the subcommittee report.
The Chair: Any comments? All in favour? Carried.
On behalf of the committee this morning, I'd like to welcome everyone. We're very pleased to be here in Oakville. This is the riding of Halton Centre, capably represented by our colleague Terence Young. We are pleased with the interest that's being shown in this bill and look forward to the presentations that we will hear in the next few days.
MINISTER OF MUNICIPAL AFFAIRS AND HOUSING
The Chair: The first presenter this morning is our minister, Mr Al Leach, who will make opening statements. By all-party agreement, we have allotted an hour for your presentation and then questions from both the opposition and the third party. Welcome, Minister Leach.
Hon Al Leach (Minister of Municipal Affairs and Housing): Thank you. Good morning, ladies and gentlemen. It's a pleasure to be here and I'm glad to have the opportunity to open the standing committee hearings on Bill 98, the Development Charges Act, 1997.
As you're well aware, we've been getting quite a bit of feedback on this bill, since we introduced it last November, from the media, from the building and the development industries and especially from Ontario's municipalities. I'd like to set the stage for these hearings first of all by thanking the members of this committee for all the hard work that I know you're going to be putting in over the next couple of weeks.
Standing committee hearings are an important part of the legislative process. They give interested parties and members of the public a chance to speak directly to their elected representatives. Just as important, standing committee hearings give people a better chance to understand what the legislation is all about. That's why I'm pleased to open these hearings on Bill 98 by tabling the draft regulations that accompany this bill. These draft regulations will contribute to a more productive and thorough discussion of the bill, and they'll give people a much clearer understanding of the detailed issues involved in this important piece of legislation.
What are those issues? First of all I'd like to talk about the broader implications of this bill. This legislation is about prosperity in Ontario; it's about the long-term competitiveness of Ontario business; and it's about fairness. The current Development Charges Act has become a barrier to economic competitiveness in Ontario. It wasn't meant to work that way.
When the original Development Charges Act was introduced in 1989, I am sure it was done with good objectives in mind. The new act was going to make municipal councils more accountable. It was going to provide a consistent, reliable and fair way for municipalities to recover the costs of services they provided for new development. These charges would pay for the water and sewer systems, for the roads and hydro that were needed before development could even take place.
The 1989 Development Charges Act was well intended, but in the eight years since it was proclaimed something has gone fundamentally wrong. Today in some municipalities in Ontario development charges can account for $20,000 on the cost of a $160,000 house. That's 12% of the cost of that new home. Right off the bat, before we think about any of the other consequences, we have to recognize a simple fact: Development charges that high can make a new home unaffordable for the average Ontario family.
High development charges can also help to explain why the construction of new apartment buildings and other multiresidential projects is at a standstill today in Ontario. They can help to explain the high costs of commercial development and the high costs of industrial expansion.
Think about that last point for a minute. A business wants to put up 100,000 square feet of industrial space. That kind of expansion could bring jobs and growth to any community in Ontario. But then the business learns that before it can begin to expand, it has to hand over $200,000 in development charges. Is it any wonder that business thinks twice before building or expanding in that community, or anywhere else in Ontario, for that matter?
Where does that leave us? It means fewer homes get built, fewer apartment units and commercial buildings are constructed and fewer industrial firms choose to build. That leads to lost jobs, lost taxes for Ontario communities and lost opportunities for economic growth and prosperity for everyone in the province.
What started out as a fair way for growth to pay for growth has ended with growth paying for more than its fair share. It has ended up as a barrier to economic prosperity in this province. In short, the Development Charges Act as it currently stands is encouraging much higher costs than are necessary, and much higher charges, I am sure, than were envisioned when the act was introduced in 1989.
In November 1995 this government began a fundamental review of the Development Charges Act. We wanted to make sure that we could reduce the cost of development. We wanted to reduce the cost of constructing new homes and apartment buildings. We wanted to reduce the cost of industrial expansion. We made a commitment to ensure that the financing of new infrastructure and growth-related services was fair.
The review took a long, careful look at some very key questions: Should development charges be used to finance all new services and facilities they are now paying for? What about the standards that municipalities were using when they calculated development charges? Were some of these standards inappropriately high and therefore too costly? Were development charges paying only for facilities and services that were growth-related, or were they also going towards fancy new facilities that would be used and enjoyed by everyone else in the entire community as well? That's where the fairness comes in.
What happens to new home buyers as soon as they move into their new house? They pay development charges that go towards new facilities that are going to be built some time in the future. But at the same time, they immediately begin to pay property taxes that go into general municipal revenues to refurbish, maintain or replace facilities already in that community. That's why high development charges can be unfair to new families in a community. It seems doubly unfair when these new families, many of them struggling to pay for their first home, are asked to pick up the tab for fancy new buildings that are going to be used by everyone else in the community as well.
During our fundamental review of the act we consulted with stakeholders in every sector. People in the development and home building industries thought government should make some radical changes to the Development Charges Act. They called for drastic reductions in the kinds of services and facilities that could be eligible for funding through development charges. You'll hear these comments expressed over the next few days by everyone in that industry. Municipalities, on the other hand, wanted the act to remain exactly the way it is today. I'm sure you will hear from the municipalities in their comments on that as well.
But both sides agreed on one thing. They agreed that development is extremely important to the economic health of this province and that it shouldn't be jeopardized. That was the starting point for our fundamental review, and today it is still our central goal in revising the Development Charges Act. We want to ensure that development is not jeopardized in this province.
Under the terms of the new Development Charges Act, municipal councils would be asked to calculate the actual benefits coming to new residents from these services when they calculate growth-related costs instead of letting new development and newcomers pay for more than their fair share.
Under another provision of the new act, municipal councils would be required to include in their background studies the long-term costs of any new services or facilities they are considering for funding through development charges.
A new and revised Development Charges Act would also promote industrial growth. Under its terms, any new industrial expansion of up to 50% of existing gross floor area would be exempt from development charges.
However, there are two key revisions that go to the heart of our concerns about the existing Development Charges Act. They go a long way towards addressing the concerns that prompted the fundamental review of the act in the first place.
First, we are proposing that the scope of services eligible for financing through development charges be reduced. Under this provision, charges could no longer be imposed for municipal facilities such as museums, city halls, tourism facilities or theatres. What's our reasoning here? It's simple. Everyone in the community is going to enjoy the new art gallery or the new theatre. Everyone will draw the benefits coming from the new city hall or the new tourism facilities. So we believe these facilities should be financed through other municipal revenues and not through development charges imposed just on new residents and new businesses alone. Instead, everyone in the community, new residents and existing residents, can decide together whether they need a new city hall or a new museum and whether and when they want to pay for them.
Second, we have proposed changes to the act that would increase municipal accountability. We are proposing that in the future municipalities make a contribution from general municipal revenues of 30% of the cost of new facilities like libraries and community centres. We also proposed that municipalities make a contribution, again from general municipal revenues, of 10% of the costs of infrastructure needed for new development. This would include services and facilities such as water and sewer systems, roads, hydro, fire and police services, transit and waste management.
As I pointed out earlier, in the time since Bill 98 was introduced last November we have received quite a bit of reaction to our proposed revisions to the Development Charges Act, especially from Ontario municipalities. Shortly after the bill was introduced, the mayors and regional chairs from the greater Toronto area, along with representatives from the development industry, established a committee to review the proposals of Bill 98. As the government, we said at that time that we supported a review of our new bill. In fact, we sent representatives to meet with the committee to clarify key provisions of the new legislation.
We also said at that time that we were more than willing to listen to reasonable concerns about the proposed revisions to the act. We said that if the legislation could be improved, then it should be. That is what the legislative process is all about. More important, we wanted to hear good, concrete solutions to the problem of high development charges. We were open to sound arguments about this proposed legislation.
I am here today to tell you that, indeed, we did hear some good, sound arguments. Stakeholders have pointed out that many of the measures we are introducing would go a long way towards achieving our primary objectives, such as reducing the scope of services eligible for funding through development charges, requiring that municipalities use average standards of service when calculating future growth-related costs, or exempting from development charges any industrial expansions that were up to 50% of the existing gross floor area.
I fundamentally believe that these changes will result in a better development charges system. However, some of these same stakeholders told us that our proposal for municipalities to contribute 10% of the costs of key growth-related infrastructure could have serious negative effects. Municipal officials told us that this requirement could result in an increased and unfair tax burden on existing taxpayers. It could result in a freeze on development, because many municipalities would no longer be able to afford the costs of new growth. After all, roads and water and sewer systems are not susceptible to gold-plating. Municipal councils are very prudent when it comes to the costs of these facilities that are required for occupancy.
0950
We said we were ready to listen, and we did. These arguments met our criteria. They were both reasonable and sound. Consequently, I would like to announce today that the government intends to move the following motion to amend Bill 98 during the clause-by-clause review in this committee: The requirement that municipalities contribute 10% of growth-related costs of water and sewer systems, roads, hydro and fire and police services would be removed from Bill 98.
We want to announce this intention now so we can hear the public's comments on it and so it can receive this committee's careful consideration. Removing this requirement will ensure that our central goal in revising the Development Charges Act is met. Development activity will continue to be promoted and encouraged in Ontario.
A final decision regarding the 10% municipal contribution towards transit and waste management will await input from these hearings. I look forward to the comments from this committee and which this committee will receive on how transit and waste management should be funded. Similarly, the government looks forward to the input of this committee with regard to the 30% municipal contribution for facilities such as recreation centres and libraries. As I said before, this is what the legislative and public hearing process is all about.
In the final analysis, we believe the new Development Charges Act, 1997, would go a long way towards funding growth in a way that's fair to everyone. This legislation would serve the needs of the people of Ontario; it would make new homes more affordable; it would create growth and jobs and promote industrial expansion; and it would stimulate the economy of this province, which is of utmost importance.
The Chair: Thank you, Minister. We now go to the official opposition.
Mr Gerry Phillips (Scarborough-Agincourt): How much time do we have?
The Chair: You'll have about 20 minutes.
Mr Phillips: For each caucus.
The Chair: For each caucus, yes. No, excuse me, for your caucus and for the NDP caucus only; the government is waiving its statements time.
Mr Phillips: Oh, good, so they don't want any time with the minister.
Another bill fallen apart, I guess is my first reaction, and another mistake that's being slowly corrected.
You make some claims about significantly reducing the cost of housing and things like that. To give the committee some idea of what we're talking about here, what's the total cost of these development charges that you had assumed would be taken off the housing sector? How many dollars?
Hon Mr Leach: Obviously it depends on --
Mr Phillips: Across the province, your total estimate of the millions of dollars that you assume.
Hon Mr Leach: I don't know whether we have a number for across the province, total. I'm saying it depends on the municipalities. Only about 10% of municipalities charge development charges at this point in time, but we know that for example --
Mr Phillips: Ten per cent do?
Hon Mr Leach: About 12% of the cost of a new home in some areas. As I think I mentioned, in some areas you can get $20,000 on a $160,000 town house, and we're reducing that by about 20%.
Mr Phillips: So $4,000 a home, is that what you expected?
Hon Mr Leach: Yes.
Mr Phillips: So you were planning to offload $200 million on to the property taxpayers; is that what your plan was?
Hon Mr Leach: No, not necessarily, because --
Mr Phillips: That's $4,000 a unit times 50,000 units.
Hon Mr Leach: It depends on what level of service municipalities provide. In some instances they're collecting development charges at the present time. I think in Mississauga they've put in reserves for development charges of about $200 million or $250 million and haven't provided the services as of yet.
Mr Phillips: But your officials must have given you an estimate of how much the development charges that you are charging were going to rise and therefore how much they won't rise and therefore how much is going on property tax. You've just told us that you expect a reduction of $4,000 per unit. I assume, then, that you're telling us you had planned to move $200 million off development and on to the residential property taxpayer.
Hon Mr Leach: The whole premise is that growth should pay for growth, not for any more than that, so the development charges that should be charged should pay for the new growth that occurs. There shouldn't be any downloading of costs on to the municipal tax base for any of the new growth. What we're proposing is that the Development Charges Act and the manner in which it could be applied would ensure that the costs of new development were paid for by development charges, but services that are provided to the entire community should be paid for by the entire community. So there's no attempt to download anything.
Mr Phillips: With your announcement today, how much money do you feel was going to be raised off these development charges that you had planned to remove and now are back on? The decision you've announced today, can you tell us how much money you now have decided to put back on to the development charges?
Hon Mr Leach: What we're saying is that 100% of the hard services --
Mr Phillips: But how much money is that? Can you give us some --
Hon Mr Leach: No, I don't have the numbers.
Mr Phillips: But surely you should have an estimate. Aren't you asking us to --
Hon Mr Leach: No, because it's entirely up to the municipality. This act allows municipalities to charge development charges, but it's not mandatory that they do. A municipality could decide tomorrow, "We made a decision not to have development charges," so it's very difficult, in fact impossible, to come up with a number.
Mr Phillips: But Minister, you're saying that you had planned to reduce the cost of housing substantially. That was your claim in your document here, that they've "gone fundamentally wrong...much higher costs." You've now announced today that you're putting the development charges back on to the housing. We simply want to know from you, and surely you owe us that: How much money have you decided to put back on an average home that had a development charge, you took it off, you now put it back on?
Hon Mr Leach: What we're saying for hard services is that it would remain the way it is at the present time.
Mr Phillips: But how much money have you decided to put back on? Can your officials give us that answer?
Mr Norman Manara: First and foremost, the 30% the minister referred to, there are ways that municipalities can get efficiencies in the ways of delivering services. That's one of the things they would have to look at, cost-effective ways of delivering services. So it doesn't necessarily translate back into the system as a cost on municipalities.
The other thing that you --
Mr Phillips: Do we have an answer on that?
Mr Manara: I'm saying it depends again on what the circumstance for that individual municipality is. In many instances municipalities already discount some of the costs in terms of the services they're providing.
Mr Phillips: Chair, can I just ask you if the committee could get from the minister or the officials -- the premise on the bill was that housing costs were very much higher than they needed to be because of development charges, up to $20,000 per unit. That's the minister's speech. They had planned to take the 10% charge off. It now is back on. Can they give us an estimate of how much money that means they've now put back on to an average home? They may not have it today, but if the premise of the bill was that the government had said it was going to reduce the cost of housing, it must have had an estimate for that. They've now changed the bill, and I'm making a formal request that the minister or staff provide that information for us. That can be done, I assume.
1000
Hon Mr Leach: If it can be done.
Mr Phillips: But surely, Minister, if your development charge was $20,000 per house -- you said your original plan would reduce it by $4,000, you've now changed that plan and I assume it's gone back on -- all we need to know is, what have you decided to add back on?
My second question is that there is this series of development charges. Can you give us now an indication of how much of the development charges you are removing from the development? I assume you are saying that those things still have to be built; it's just that they will be funded not by the development but by the existing taxpayers. How much money do you expect is transferring from the development charges to the existing property tax base?
Hon Mr Leach: What this bill does is ensure that the cost of new development, the cost of new growth, is covered by development charges.
Mr Phillips: But you've indicated to us how much is collected currently.
Hon Mr Leach: What we're saying is that any costs that are required beyond what is needed for new growth are paid for from the general tax base.
Mr Phillips: How much is that? How much currently is raised from development charges that you now expect would be transferred on to the property taxpayer? D you know that number?
Hon Mr Leach: I don't anticipate that anything would be passed on to the property taxpayer.
Mr Phillips: Who else pays for it?
Hon Mr Leach: We're saying that the development charges that should be charged should pay for new growth. Growth should pay for growth; we're saying that. But what we're saying is that new development, the new home buyer, shouldn't pick up more than his fair share and cover off the costs of services that will be of benefit to the entire community. That cost should be related to the general tax base.
Mr Phillips: But you have said that because of these exorbitant development charges, "gold-plated," to use your term, that are currently put on development, you're moving over on to the property taxpayer. I simply want to know, and I think you owe us this: How much money do you expect that is currently being raised from the development charges will be moved over and paid for off the property taxpayer?
Hon Mr Leach: The answer is none --
Mr Phillips: That's impossible.
Hon Mr Leach: -- because the development charges will pay for new growth. Right at the present time, we believe that there are development charges being charged that cover more than new growth.
Mr Phillips: Of course there are. But I'm saying, how much is currently being used that way that now the municipalities will have to raise through property tax? Surely you must have that number, because that's the premise of your bill.
Hon Mr Leach: Let's go around this one more time. What we're doing is ensuring that the new growth pays for new growth and that if a municipality wants to provide a facility that is beyond what is required for new growth, then that should be paid for by the property tax. But to have a global number province-wide is difficult, if not impossible, because you have to look at it from a municipality-by-municipality standpoint, remembering that this act allows a maximum charge and the municipality can discount or have zero, for that matter.
Mr Phillips: Are you saying to us that your ministry does not have a figure on how much money is being raised by development charges currently and how much, on average, you have decided to take off development and put on to this? That has to be the premise of your bill and surely you can provide us with that.
Hon Mr Leach: We can tell you how much municipalities are raising through development charges at the present time.
Mr Phillips: And how much on average will be moved, as a result of this bill, off the development charges and on to the residential property taxpayer.
Hon Mr Leach: We can give you an estimate of that.
Mr Phillips: Of the 30% that you are going to continue to allow to be raised, how much money currently is being raised with that 30%?
Hon Mr Leach: That's on the soft services?
Mr Phillips: Yes. How much do you expect will have to be raised now by the property taxpayer? And on the 10% charge, you are removing all of the 10% provisions?
Hon Mr Leach: With the exception of transit and waste management, and we would like this committee to take into consideration the deputations that are made on that. We're exempting the 10% on all of the hard services such as roads, water, sewer etc. We're proposing to leave the 10% on waste management and transit subject to the presentations that are made to this committee.
Mr Phillips: Do you have the number of how much money that would represent?
Hon Mr Leach: Not particularly, no. I don't know how you'd come up with that number because I don't know how you'd come up with a number for waste management, for example, of what's going to be required for the future.
Mr Phillips: The expectation is that the price of homes will drop as a result of this bill. Can you give us an estimate of how much you expect the price of homes to drop as a result of the bill?
Hon Mr Leach: Again that's extremely difficult to estimate. If everything stayed at a standstill, if there were no increases in the costs of materials or increases in other costs, on the example that we used, the $160,000 town house, that would probably drop by about $5,000.
Mr Phillips: By $5,000? That's interesting.
Hon Mr Leach: If everything stayed equal, if nothing --
Mr Phillips: With your bill it will drop by $5,000, is that right? Does that therefore mean the municipalities have to find $5,000 more money to fund the services?
Hon Mr Leach: No. What we're saying again, to repeat, is that 100% of the services required for new development would be paid by the development charges. What we're indicating is that there were development charges being charged that went beyond what was needed for new growth.
Mr Phillips: But I take from you that you expect a $5,000 drop in the price of homes as a result of your bill.
Hon Mr Leach: I'm saying if everything stayed equal, the reduction in the development charges that could be charged would be equal. In that example it would be about $5,000.
Mr Phillips: Can I assume that the municipalities -- first, they're not wasting the money, they're not throwing the money away; they're building needed provisions -- every time you raise $5,000 less from development charges --
Hon Mr Leach: It's not a matter of waste.
Mr Phillips: -- Mississauga now has to find $5,000 more money off the property taxpayer?
Hon Mr Leach: No. What we're saying is that the new home buyer, the young couple that's going out and buying their new home, should only pay for the services that are required for that development to get that new home. If there are services that are being provided beyond that, that should be shared by the entire community, including the new home buyer, who starts paying taxes.
Mr Phillips: I understand that, but the entire community has to find the $5,000 per unit then, right?
Hon Mr Leach: Or ensure that the services that are provided are contained only to what's required for the new development.
Mr Phillips: But $5,000 is more than I had expected from your bill. I assume now Mississauga has to find $5,000 per unit.
Hon Mr Leach: That's an interesting concept but you can't protract it out in that manner.
Mr Phillips: Why not? You're saying the development charges will drop by $5,000 on a unit. The services all have to be paid for, I assume.
Hon Mr Leach: The services would all be paid for. Any service that is required for the new development would be paid for by the new development. That's what we're saying.
Mr Phillips: But it's dropping by $5,000. They're going to spend the money. Mississauga has to spend the money. The development charge drops by $5,000 --
Hon Mr Leach: They haven't so far. They've banked about $250 million so far in reserves, as they've charged for development charges and haven't spent the money. So it's not a matter of, you have to rush out and raise taxes every time a new development takes place. They apply the development charges now for something that's going to be required some time in the future.
Mr Phillips: I thought your plan was to reduce the cost of homes and to have the other property taxpayers pay for it, the $5,000, but now you're saying you want to get at the reserves in Mississauga.
Hon Mr Leach: No. Nothing could be more off base than that assumption. What we're saying is that they collect money for a library; the library is going to be built at some time in the future. They put that money into reserves. When the new library is required, they take the money out of those reserves and build the library.
Mr Phillips: The $5,000 is an interesting figure. Is my time finished?
The Chair: Actually, your colleague has a question as well.
Mr Mario Sergio (Yorkview): No, that's fine. If he's got more questions he can carry on.
The Chair: It's up to you.
Mr Phillips: Go ahead, Mario.
Mr Sergio: Just a couple of questions. Do you have any other amendments that you're proposing to make to this bill, Minister?
Hon Mr Leach: I'm sure there will be other amendments. I don't think a bill has ever gone through the House that didn't have a number of amendments, and that's what this process is all about, to give the stakeholders an opportunity to come in and comment and make suggestions on how the bill can be improved. I'm sure there will be suggestions that will cause some amendments. I don't have any amendments at this point in time, although I would hasten to add that we're looking forward to the comments both from the industry and from the municipalities on the 30% copayment and on the 10% on transit and waste management. If there are arguments put forward that would revise those copayments, we would be glad to hear them and make amendments, if there are strong, solid arguments made.
1010
Mr Sergio: You gave us some notice that you're willing to remove the 10%.
Hon Mr Leach: Yes, we intend to introduce an amendment to take the 10% for roads and services --
Mr Sergio: So you have in mind other amendments that you wish to introduce. I was wondering if we could have them now so they can also be debated, if you will.
Hon Mr Leach: No. What we have in mind is listening to the presentations by the deputants, and if there are strong arguments put forward to suggest that amendments should be made, then we would be prepared to make them.
Mr Sergio: In other words, we will expect some amendments from you later on, before we decide.
Hon Mr Leach: As a result of the hearings I'm sure there will be some amendments.
Mr Sergio: How much time do we have, Madam Chair?
The Chair: You have about four minutes.
Mr Sergio: Bill 103, which is one of your other bills, is supposed to give local municipalities all kinds of powers to conduct their affairs.
Hon Mr Leach: No. Bill 103 does absolutely nothing other than amalgamate the six municipalities in Metropolitan Toronto.
Mr Sergio: With no other strings attached?
Hon Mr Leach: That's the sole intent of Bill 103.
Mr Sergio: I see. How would municipalities conduct their own affairs without interference from the province in Bill 103 then?
Hon Mr Leach: I don't know how you draw any connection to Bill 103 and the powers of municipalities.
Mr Sergio: Bill 104, Bill 106, would that be the same thing, Mr Minister?
Hon Mr Leach: I can't comment on Bill 104. That's the education bill. Bill 106 is the property tax bill and it obviously is going to bring some fairness and equity into the property tax system by having everybody pay their fair share. Bill 103, which is the City of Toronto Act, relates only to the amalgamation of the six municipalities into a single city.
Mr Sergio: What I'm trying to get to is if we can see this right, because we are telling municipalities that they have a right to conduct their businesses, and then we are hearing, "You cannot use certain taxes." There are many taxes municipalities could collect from -- not to do. We know that the local municipalities will spend their taxes according to their needs, and if one particular community within their municipality needs a community centre they don't have, which they couldn't get over the many years, they should be able to build that swimming pool or community centre or fire station.
Hon Mr Leach: There's nothing to stop them.
Mr Sergio: What we are doing here again is imposing on the local municipality and saying, "You cannot use development charges," which is one of the areas that municipalities sure have a free hand in, instead of saying: "That's your pool of tax dollars. Use it wisely. Use it for whatever is needed." We are saying, "You cannot use it for a theatre, a fire station, ambulance, whatever." Minister, what is the message you're telling the municipalities?
Hon Mr Leach: What we're saying is growth should pay for growth, but growth shouldn't pay for services that the entire community can use. I don't think it's fair that a young couple going out and buying their first home should have to pay for a facility that is used by everybody else in the community. They should only pay for the services that are required for their growth, for their expansion. If they cause an expansion of services as a result of that new development, they should pay for it, but they shouldn't pay the total cost of a new city hall. Everybody should contribute.
Mr Sergio: I have another few questions, but I'll concede.
Mr Phillips: I just want to confirm the number of $5,000 per unit.
Hon Mr Leach: I said, Gerry, that based on the example of $20,000 on a $160,000 townhouse, in that example the reduction would be about $5,000. But you can't say that applies to every house that's going to be built in Ontario.
Mr Phillips: Okay.
Hon Mr Leach: And that's everything else being equal.
Mr Phillips: That is after your amendments; is that correct?
Hon Mr Leach: Yes.
Mr Phillips: That's useful.
Hon Mr Leach: Well, it's going to depend on what --
Mr Phillips: No, that's very helpful, $5,000 a unit.
Mr Tony Clement (Brampton South): How did you get that figure?
Mr Phillips: That's what he's saying. He just said $5,000 a unit.
Hon Mr Leach: I said as an example. That's one example.
Interjections.
Mr Phillips: He's the minister. Let the minister speak.
Mr Clement: You're a master.
Hon Mr Leach: As one example, on a $160,000 townhouse where the charge is $20,000, in that example the changes that we're proposing could result in a reduction of about $5,000. But to try and extract that so that every house that's going to be built in Ontario cannot be done.
Mr Phillips: That's a useful number.
The Chair: We'll now move to the third party, to Ms Churley, for questions or statements.
Ms Marilyn Churley (Riverdale): Minister, I'm looking forward to the further information on the numbers. You're lucky; I'm not the numbers man, so to speak, for my party.
Hon Mr Leach: Neither is he.
Ms Churley: Did Hansard pick that up? "Neither is he" meaning Gerry Phillips.
Mr Phillips: Oh God, Al, your ego knows no bounds.
Ms Churley: I'm not going to get into them in great detail. I did have some questions that have been most ably asked, I may add, by my colleague the finance critic from the Liberal Party.
Mr Sergio: Try to get the answer now.
Ms Churley: I look forward to getting these figures later.
Hon Mr Leach: By the way, my official just told me there was about $300 million.
Mr Manara: Yes, municipal-wide in 1995. Roughly $300 million in total development charges in 1995.
Ms Churley: In 1995. That's across --
Mr Manara: Across the province.
Ms Churley: Right across the province. Okay.
Mr Phillips: Then they put it on the property tax.
Interjection.
Ms Churley: Excuse me, member for Mississauga South. I have the floor now.
Mrs Margaret Marland (Mississauga South): I'm only speaking to Mr Ouellette.
Ms Churley: Minister, about 40% of municipal transfers are gone, taken away by your government. At the time that happened, the municipalities were told that they would be given a toolbox full of appropriate tools to make up for those losses.
I think you've been hearing from Hazel McCallion and others that development charges are one of the few really flexible areas that they have outside of raising taxes and that with the loss in the transfer payments -- and now of course added to that is the downloading. We have no idea at this point where things are in negotiations between you and the municipalities, but there's great fear that the municipalities are going to be on the losing end of that stick, given what we know today. Now, I'm happy to hear that some of that is changing.
I have heard -- and I personally have seen no proof to the contrary, no evidence whatsoever -- that developers are actually going to charge less for housing because development charges go down. In fact, generally what happens is that houses are sold at the market rate. I'd like to know what evidence you have, what information you've gathered, what background you have, anything you can show us to prove and guarantee that for that young couple you like to refer to, the cost of their housing will actually be reduced by the amount the developers say. What evidence do you have of that and can you table it?
Hon Mr Leach: I can say that will be brought forward during the presentations by the development industry. I can assure that if it was a straight pass-through to the home buyer, then the development industry really couldn't care less about development charges, using your analogy.
Ms Churley: They can make more money. If they don't have to pay as much to develop it, with all due respect to my friend sitting over there from the Urban Development Institute, they can make more money.
Hon Mr Leach: The cheaper they can provide a new home, the more houses I think that they will sell. For example, the industry will tell you that every $1,000 reduction that you have in a home generates about 6,000 more potential buyers. Every time they can reduce the cost of a new home by $1,000, they have a potential of 6,000 more potential buyers. That's the benefit to the industry: "If we keep that cost down, we'll sell more houses."
1020
Ms Churley: But you still haven't answered my question. You're saying that the advantage to the developer is he or she can build more houses, which makes more money for the developer, but there's no evidence that the developer, in turn, is going to reduce the cost of that housing for the home buyer. I mean, the marketplace decides that. What evidence do you have? You say that later we'll be hearing from the developers and they're going to give us this information. I believe that you as the minister have a responsibility and a duty to make sure that those prices are actually lowered for the home buyer. You're saying, "Trust us."
Hon Mr Leach: Again, the whole purpose of the bill is to ensure that the residents of an existing community don't have to absorb the costs of growth through the property tax, that new growth should pay for new growth and that the developers are going to go in and take the money that's required for roads, sewers and so forth and apply a levy to each new home that's built, but they shouldn't apply any more than what is necessary for that. That's the intent and the direction that we're going in with this bill.
Ms Churley: My understanding of what could very possibly happen here then is that the new homeowner will buy a house at market value. I still have no evidence, and I've heard from various --
Hon Mr Leach: But if I could --
Ms Churley: Just let me finish my question here. I've heard from various municipal councillors and even from some developers that houses are sold at a market rate. So the homeowner isn't going to save money, the developer is, and therefore, according to you, is able to build more houses to make more money. Then those same homeowners who will pay market value for their new house will quite likely pay higher taxes, along with the rest of the community, to cover the costs for the so-called soft services that every new community or expanding community needs.
Hon Mr Leach: If I can build a house and put a house on the market for sale at $5,000 less, or $1,000, $2,000 or whatever number it is, less than you can and put them both for sale side by side, then I'm going to sell my house before you're going to sell your house, and that's what drives market conditions. There's no advantage to a developer to walk in and say, "Well, I can take the development charge and just whack it on top, if the developer beside me passes that through to the home buyer."
Ms Churley: But what evidence do you have that the developers are going to do that?
Hon Mr Leach: The evidence is just what you've said. Market competitiveness is what keeps prices down.
Ms Churley: But don't you think that market competitiveness is much more complex than costs of development, the development charges? What makes you think that in itself is going to drastically influence the costs of homes? I mean, there is no evidence and that's what I'm asking for. It's blind faith. When you have experienced municipal councillors and mayors and some developers saying that those costs are not going to be passed on to the homeowner, I would like, and I'm sure this young couple buying their first house would like, to have the evidence that they actually are going to see the savings. So far, I have seen no evidence of that.
Hon Mr Leach: I think the young couple can inquire at the municipality as to what they're paying for development charges, what part of that new home relates to a development charge.
There have been some proposals that that be disclosed at the time of purchase and that's something I would like to have some input on from this committee and through these hearings as well, that if somebody is buying a house, they should be told up front what that development charge is so that they can compare from development to development and so that they can hold their municipal officials accountable as well for new services, what that charge is.
Ms Churley: To come back to the subject of the amendment you made today, that 10% of hard services will be removed, can I ask why you at this point left out, I believe it was transit and waste management, to be determined later?
Hon Mr Leach: Because we wanted to hear the arguments from both the industry and the municipalities relating to those two issues. They're two complex issues. Strong arguments can be made pro and con, and I think this committee should hear those arguments from the development industry and from the municipalities as to what their positions are on transit and waste management before we make a decision on it. That's what this process is all about.
Ms Churley: Why did you, in that case, pick and choose? Why the other hard services? Why leave these two out? I'm sure there are differences of opinions on the others.
Hon Mr Leach: There has been a committee set up of the mayors of the GTA and the development industry to look at this entire bill. Arguments were put forward, and there was agreement reached between the municipalities and the industry that the 10% on hard services could be dropped, and we've listened to that. But the arguments on waste management and transit were still ongoing and I would like to have both of those stakeholders given the opportunity to make their presentations here for you to have input on.
Ms Churley: I just want to come to Bill 107, the sewer and water bill. There are so many of them, it's hard to keep track, but I just did a householder to outline them all for my constituents and so I remember the numbers of each bill. You have a lot of those bills, Minister.
Hon Mr Leach: That's not one of them.
Ms Churley: You're very busy these days. I know water and sewage is not one of them, but it's connected in this bill in a way because it's part of the number of downloading bills, and that is removing sewer and water, those that are within the provincial purview. There is no flexibility there any more. The municipalities have to take that on. It will be given over to the municipalities.
I've asked questions of the parliamentary assistant to the Minister of Environment about this, and one of the concerns we have raised is the privatization of sewer and water services. There is a caveat. There is a clause in the bill which says that anybody who buys the system would have to pay the province back whatever amount of public dollars was put into it, which I think would just be the cost of doing business. It wouldn't be a whole lot of money, no interest or anything attached. So there is great concern and fear overall because of, again, the difficulties that municipalities are going to have in terms of the downloading. I'm sure if you and I got into that we'd disagree, but I'm reflecting what municipalities, leaders and councillors, are saying to me, concerns about that and the funding, the 40% or so that's already been lost, and that municipalities will be more or less forced to sell them off.
Water and sewage, of course, is a hard service and a necessary service for any new community or to be expanded in an expanding community. I'm just wondering, in the context of this bill, if that's been taken into consideration and how that would fit into the whole scheme.
Hon Mr Leach: The only relationship that I think I could tie between Bill 107 and this bill is that if there was a new water or sewage facility required to accommodate new development, then the municipality would have the choice of either operating it themselves or contracting that out. But the cost to the taxpayer shouldn't be affected one way or the other; it's just a matter of who manages the facility.
Ms Churley: So you honestly and genuinely believe that these development charges can be lowered and municipalities can lose that flexibility, and that with the downloading that's going to happen, in whatever variation it finally comes out at the end of the day, and with this flexibility gone, taxes will not have to be raised? And you firmly, honestly believe -- how did you put it -- that growth will pay for growth?
1030
Hon Mr Leach: That's the entire intent of this bill, to ensure that growth pays for growth.
Ms Churley: What does that mean exactly? Paint me a picture, okay? Take, say, Oakville or the riding we're in today. What do you know about development that hasn't happened because development charges have been too high? What information do we have that there's going to be so much new development that those costs are going to be covered off, no new taxes as a result for those soft services? We call them soft services but they're absolutely necessary services to a thriving community, as you well know. They have to be financed. Whether it's a new community that has nothing or an expanding community, you've got to have your libraries and community centres and possibly, depending on where amalgamation goes down the road, city hall, whatever. These things are necessary. What evidence do we have?
Hon Mr Leach: I can give you some examples. I don't have them with me but I have been given examples where industrial development has not taken place as a result of development charges, where that industry has decided to locate elsewhere, usually in the United States, as a result of high development charges. The example I used was where an industry had to come up with $200,000 in development charges for an expansion.
There was one good example, and I don't know whether it's appropriate to use, I think it probably is: Brampton. Chrysler was expanding a plant that didn't cause one single expansion of any municipal service, not one, and they were charged $800,000 in development charges. I was told by Chrysler directly that they were directed by their corporate headquarters not to do that expansion. They could relocate that plant to the US and get a 20-year tax exemption, never mind an $800,000 development charge to do it. Fortunately, that plant went ahead. The only reason it went ahead is because the Canadian dollar dropped to 72 cents. If the Canadian dollar had been at 75 cents, that plant would be in the US today.
It's that type of thing that you have to ensure, that we don't kill the golden goose. Growth should pay for growth, but development charges should not be used to create a pot of money for the municipality to use that is not related to the growth that's taking place.
Ms Churley: How can you justify that, given your earlier statements and the Premier's statements that government should gets off the backs of municipalities and let them govern themselves? This is a huge interference in the way they're able to determine how to finance infrastructure and how to finance services that are much needed for their communities. How do you justify that?
Hon Mr Leach: This government is giving more autonomy to municipalities than they've ever had before in the history of this province. Municipalities have the ability to make more decisions, to be responsible for all of the services that they're required to provide, far more than at any time ever in the province.
Ms Churley: But they say this is a huge piece of the autonomy that they had that was very important to them to be able to --
Mr Phillips: They couldn't make decisions on long-term care before and now they can.
Ms Churley: Thanks, Gerry.
Hon Mr Leach: They can charge for growth, put development charges on to make sure that growth pays for growth.
Ms Churley: I hope you will table any information you have that actually shows on paper, with numbers attached, how you predicted that growth will finance growth in this aspect and that taxpayers, including --
Hon Mr Leach: To get back to your question, this is still a decision that solely rests with the municipality. The city of Toronto, for example, where you and I represent ridings, has no development charges whatsoever. Most municipalities in the province do not have development charges. That's a decision that the municipalities have. All we're saying is that if you're going to have development charges, this is the maximum amount that you can put on to a new home buyer.
Ms Churley: I would argue, what's wrong with that flexibility? Community is not one cookie-cutter. Communities have different needs and different levels of available financing. I sat on Toronto city council, and you know what some of the issues there were, the tradeoffs that happen all the time between height and giving more height to high-rises. The city of Toronto and other cities found other ways essentially to get something back.
Hon Mr Leach: And they still have that flexibility.
Ms Churley: Yes, and came down to negotiations. That's fine, that's the kind of deal the city of Toronto was able to work out. But that doesn't mean that Mississauga needs to have a cookie-cutter approach to how to levy development charges. That's what mayors of municipalities are saying. They need that flexibility to reflect their own communities.
Hon Mr Leach: They have that flexibility.
Ms Churley: But they won't have it any more.
Hon Mr Leach: Oakville and Mississauga and Brampton and Markham do not charge the same amount for development charges. It varies community by community, depending on what that community needs. Some of them discount it, some of them say, "No, we want new development and we're prepared to raise taxes to generate that new development." That's a local decision by local municipalities.
Ms Churley: How much time --
The Chair: We're right there, within about six seconds.
Ms Churley: Gee, I could have done it in six seconds.
The Chair: Thank you, Minister, for taking the time to come to the committee this morning. We appreciate hearing from you.
Hon Mr Leach: A pleasure.
Mr Phillips: We look forward to that information.
ONTARIO LIBRARY ASSOCIATION
The Chair: We're now moving to the section of the committee hearings where we hear from representatives of various organizations. The first organization that is scheduled to appear is the Ontario Library Association. Good morning. Welcome to the committee. Just so you know, you'll be given 20 minutes for your presentation time. That will include your own presentation. The remaining time will be divided between the three caucuses. For the record, would you please introduce yourself.
Mr Greg Hayton: My name is Greg Hayton. I'm the president of the Ontario Library Association. The Ontario Library Association is the voice of the library community in Ontario. It is the largest library association in the country, as well as the oldest. We've been representing libraries for 97 years.
The first comment I'd like to make -- and I'm sorry that the minister was unable to stay, is that we want to commend the government for the process it has followed in drafting this legislation, these amendments to the Development Charges Act. There's been meaningful consultation with the parties affected by the legislation. The staff in the municipal finance branch brought all the stakeholders together in a long series of meetings in which we were able to provide our views, comment on the views of others. In addition, with the introduction of Bill 20 over a year ago which froze this legislation, the government made its intentions very well known. It gave plenty of notice for interested individuals and groups to respond. The process has proceeded in a timely fashion but without unseemly haste.
This is the way legislation should be developed in a democracy. The reason I wanted the minister to hear that is we are less comfortable with the speed with which he's dealt with other parts of this legislation. I wanted just to be able to say to him, and maybe his caucus will be able to pass that on, that sometimes it's not what you do, it's how you do it; not what you say and how you say it. That's a lesson that I think would be a useful one, because libraries have a number of pieces of legislation that we are concerned about right now. The other is moving with unseemly haste as far as we're concerned.
1040
When the minister presented this legislation, he focused on job creation, investment and economic growth as the reasons for making these changes. We would have appreciated it if the minister had also identified healthy, viable communities as essential to long-term growth, but in any case, we do agree with the motives of the government. We feel that stimulating economic activity is very important. We'd also like to say that in this age, the information age, public libraries are part of the solution, not part of the problem. Public libraries should be supported, not penalized in their role in economic development, in their role in helping with the educational infrastructure that creates a well-educated, skilled workforce.
When you read my brief later you'll have an opportunity to look at the kinds of activities libraries are involved in relating to both the economy and education, but I won't take that time now.
We have a number of comments to make and suggestions for change, but we want to acknowledge that the government has taken what we see as appropriate and prudent action in continuing to include libraries in the core of development charges. Not only are libraries involved with the economy and education, they are central to the perceptions of people in cities, towns and villages as to what their community is. In fact, it used to be that every community had a post office, a city hall and a library. Post offices are long gone now. I wonder what's happening with city halls with amalgamation. However, libraries continue to be very important to people and it's important that the government recognize that, and it has.
My other positive comment is that certainly as an association, we support the government's objective in requiring municipalities to set out in detail the background needed to develop their actual development charges bylaw. Most municipalities have been doing this all along; not all, however. We feel it's only right that the government demand that these sorts of studies be done that justify the basis for the development charge.
Where we have a problem -- and obviously we were pleased that the minister made his initial comments. I was waiting for the second half of his statement. Unfortunately that didn't come, but I'm sure members on both sides will be working together to influence him in that area. Tony, your past interest in libraries I'm sure will help. In any case, the real problem is those services that have been deemed essential are continuing to be funded by development charges. How can we have something that's 70% essential? No, you can't be half pregnant. This is either an essential service or it's a frill. I don't think people in Ontario communities think libraries are frills. They think they're essential and they should be completely funded.
Let's look at it practically. The minister was interested in ideas about this. You've taken out of the legislation those services that communities tend to only have one of: city halls, art galleries, museums. Those are central services. Okay, so that's the rationale for removing them. When you build a new library branch, you build it in a new community because there's new growth and there are new people. You're not going to get somebody driving all the way across town with three kids in the back of their -- I'll just wait for Mr Young because I know he'll feel this is important.
Mr Young: I know it's important.
Mr Hayton: You're not going to get someone driving all the way across town, past their local branch library, to the other side of town to go to a new branch library. The minister said: "Growth should pay for growth. We're going to build a new branch library in a new community, funded by the development charges from that area." That's appropriate, but we're not going to build 70% of the branch and then doubletax the rest of the population for the other 30%. They are not going to drive across town to use that branch. People are going to walk to their local community branch. We'll leave it to the recreation community to make their case. Maybe people drive all over the place to go and play hockey, maybe that makes sense, but in terms of libraries, I can tell you from my own experience it is a community, it is a local-related service. It should not be in that 70% category; it should be moved into the 100% category.
The other point I would like to make: We had long, hot discussions at the meetings the ministry held about the link between current development charges, the act and the high price of housing, the depressed development industry and shrinking jobs in the construction industry. It's been a contention of our association that neither the development industry nor the government have made any link between those two. In fact, there's a bit of an irony because the government has required in this new legislation that municipalities do a background study, a long-range planning analysis, all this sort of thing before they can put new development charge legislation on the table, whereas we have this legislation in front of us which develops the whole process, and there are no background studies at all. There has been nothing done on this.
Interjection.
Mr Hayton: I'm not getting into partisan discussions here, but I must say the minister really failed to respond to any of those questions. There has been no background work done to justify that link. That's why we do not feel there should be a 30% pullback, particularly in the area we're in, because we do not believe that housing prices are going to drop as a result of not paying 100% of development charges on libraries. In fact, what we can see from the past six to eight months since we had those meetings last summer is that there's been a major change, a significant upsurge in housing starts all across the province. There's been no change in the development charges legislation.
Being a librarian, of course, I just researched this. I brought a couple of pieces of my local paper in Cambridge: "Housing Boom Hits Region." This is March 11. "Recent figures from CMHC show residential construction climbing 350% in the Cambridge-Kitchener area in February this year compared to a year ago."
How about the Tuesday, December 10, Globe and Mail report on business: "New Home Building Heats Up."
"New house construction last month rocketed to a two-year high as rock-bottom mortgage rates and steady prices enticed home buyers.... `This is as good as we've seen since the latter part of the 1980s,' said John Sandusky, president of Toronto-based Sandbury Building Corp." He goes on to say, "The only thing that could wreck this recovery is a bolt out of the blue like a currency crisis, a banking collapse or a referendum in Quebec."
I see Monarch Development. I presume Monarch Construction and Monarch Development are the same. I'm sure you'll want to ask Monarch Development later on when the vice-president is here. His boss, John Latimer, the president of Monarch, "expects to sell a record 800 homes this year and `Our order book indicates that 1997 will be even stronger.' The company recently sold a home at its Bridle Trail development in Unionville...for $845,000. `We haven't seen numbers like that since the 1980s,' Mr Latimer said. `It tells me the recession is over and housing is back.'" He goes on to say, "Generally we don't have to give away a free air-conditioner or anything to close a deal."
To be honest with you, if Mr Latimer isn't going to give away a free air-conditioner now that he's got people crawling all over them, do you think he's going to give half back, pass on to that young home buyer spending whatever to build that new home? Do you think he's going to give back the 30% he's saving for the library that's going have to be built down the road? I don't really think so, and I'd be willing to put a wager on that with any member who'd wish to take me up on it.
Mr Young: The guy with the $800,000 house has his own library.
1050
Mr Hayton: You may be right. But Mr Young, we must admit that the minister, using his $20,000 of development charges on a $160,000 town house, picked that one as really not a general example. In fact, when the other gentleman tried to put $5,000 on it, everybody was backing away from it because obviously it wasn't a good, representative sample.
In conclusion, I would like to say that I also think, and our association thinks, that new growth should be paid for by the new home owners. The minister said it about seven or eight times. What he wasn't able to connect was, as far as I was concerned: Why then are we only going to be paying 70% of new growth in a library branch? I hope the committee looks at this carefully. It is necessary. The minister talked about fairness.
It is necessary to balance the contribution of new members to the community with that of long-standing residents who have already paid the costs of current services and facilities through past development charges and their property tax. They wouldn't need that new branch library if they didn't build that new part of the community. The people living in the older parts of the community would continue to use the existing facilities. I think there's a contradiction here that I'm hoping the committee, as it deliberates through clause-by-clause, will look at very carefully.
I'd just like to wrap up by underlining what I've said. We commend the government for the process. We think it's been a good one. We endorse those elements of the legislation which require municipalities to justify their development charges. Having justified them as growth-related, we don't feel that 30% should be taken off. After all, you've already justified that it's growth-related. If you can't justify that it's growth-related, then you can't make that charge, so why do you need the 30% too? It doesn't make sense.
Finally, we want to underline the importance of libraries in this whole process. We're not talking just about building houses, we're talking about community. That's what is going to continue to make this province a desirable place to live and an important place to invest in. Thank you.
Mr Young: Thank you very much. I want to tell you I totally support what you said, that libraries and the information they provide are critical to the economic and educational needs of our province; I totally agree with that. But I want to talk to you about how libraries work and the future of libraries because I'm trying to understand that. I work with the colleges and universities as well, and we know people are getting a lot more information off the Internet. A very high percentage, a relatively high percentage of our citizens have Internet access in their own home.
You made a comment that people won't drive to another library. I tell you, that happens here. For instance, in my community, Glen Abbey, they have a lot of recreational books and self-help which are related to exactly what you said. But if I want to get a good selection of biographies or academic, I drive to the downtown libraries, so that does happen.
What I want to ask you about -- you talk about 70% versus 100% -- aren't there new ways that libraries can operate, and aren't the collections going to become even more specialized to provide people with better service? So they might actually be able to operate more economically.
Mr Hayton: May I make two comments? First of all, Mr Young, I don't think Oakville is representative and the average income is representative of the broad base of our province.
Mr Young: I'm not suggesting one size fits all. I'm just telling you my experience as a library user.
Mr Hayton: I'm just responding to your comment about people having Internet in their homes. I think that may be something that is more prevalent here, but I know in my own community of Cambridge, with a significantly different economic base, that is not the case. The library continues and will continue to be the focus for use of electronic resources.
I want to clarify the question of going to another library. My point was that if you have a neighbourhood branch in your community, you are not going to drive past your neighbourhood branch to go to the neighbourhood branch in another, new community. You may well go down to the central library to get additional resources, but you will not go from your neighbourhood, which may be an established one, to a brand-new neighbourhood that has the same size of facility with a new branch. So it's that new neighbourhood which should be paying for the branch in their own --
Mr Young: With respect, though, I disagree. People do that because the collections are different. And people don't walk a lot; they drive more.
The Chair: Our time is short. To the Liberal caucus, please. Very quickly, brief questions and answers.
Mr Phillips: I appreciate an expert witness who knows libraries here. What this is all about is in my mind, and we eventually will get the numbers, I gather there is $300 million raised every year from development charges and the government is trying to shift a portion of that on to the property taxpayer. I make the assumption municipalities are not foolish spenders of money; they will only build things the community needs. So if they move a portion off development charges, it goes on to property tax. That's what we're talking about here: shifting the burden on to the property tax.
I'd like to get from you the real impact of that in communities across the province, as now the plan is that the existing residential property taxpayers are going to have to pick up 30% of the cost of a library that used to be paid for from new development. What, in practical terms, is likely to happen in municipalities around Ontario that have seen growth, need a library and have that in front of them?
Mr Hayton: There are three or four possibilities, and none of them is actually all that good. What may result is service inequities in different areas of the municipality, if there is a delay in the building of the new facility because the 30% has to come from the broad tax base rather than from the community that demands it. That's going to shift to an overutilization of services in the other area, and there's going to be a drop in service quality. The alternative, of course, is that taxes are going to go up. So any one of those impacts, or all of them in some form or other. I think it's negative in terms of library service.
Mr Phillips: Does your organization have --
The Chair: Excuse me. Ms Churley.
Ms Churley: Thank you for your presentation. I look forward to reading through this. It seems quite knowledgeable and you've certainly done your research.
I must say that I was alarmed by Mr Young's comments about Internet usage, perhaps implying that community-based libraries are on their way out.
Mr Young: That's not what I said at all.
Ms Churley: I said "perhaps." Why else bring it up? The reality is you could perhaps accuse me of being a Luddite. Although I use the computer myself, I still think the community-based library and the reading of real books, which is a very different process and part of the learning process by which kids learn to read and write and be educated -- I was alarmed by the implication of that. My question is, in this short time frame, do you have similar concerns that the whole idea of the community-based library may be overall, at least with this government, starting to lose some popularity and that this defunding could in fact end up moving it in that direction?
Mr Hayton: We are concerned about some changes that are being proposed by this government with respect to library governance. However, libraries in this country have been around a lot longer than any government and I think they would continue to thrive. As for the issue, we don't see it as a competition between computer-based services and book services. We see them both as compatible. They have different roles. They're going to be all part of, I think, an ongoing community-based library, although with that extra 30% of development charges, we'll be able to build those libraries when we should, rather than later down the road.
The Chair: Mr Hayton, on behalf of the committee, I thank you for taking the time to come before us today with your presentation. We appreciate hearing from you.
1100
CITY OF LONDON
The Chair: Our next presenters come from the city of London. Welcome, Mr Hopcroft. I'm pleased you're able to come before the committee today with your presentation. Please introduce your colleague.
Mr Grant Hopcroft: I'm joined by Peter Christiaans, who is the manager of financial planning and policy from the city of London finance department. For those of you I haven't met before, I'm no stranger to discussions on development charges, having represented AMO during the lead-up to the act that is under review at the present time. After passage of that legislation, I served as a member of the implementation task force, which met for many months, and not for some months, and then met again to try to bring together the divergent views of the development community and the municipal sector.
I'm pleased to have the opportunity to bring forward some perspectives on behalf of my community, the city of London. As with most communities, you probably won't be surprised to learn that the city of London is opposed to much of what's contained in the proposed legislation. Two tenets guide our sentiments. First, we believe that the subject legislation should at least allow for the possibility that growth pays for growth. Notwithstanding what the minister said earlier this morning, that critical concept has been removed from the proposed legislation. Second, the legislation must ultimately ensure that local authority to decide on growth financing is preserved. In fact, we believe that the existing legislation has generally served us well and could continue to do so.
The Development Charges Act was originally passed to provide uniformity in the tools available to municipalities with respect to how the costs of growth could be recovered. The principle behind the legislation was clear: that costs reasonably attributable to development were recoverable from that development and that growth pay for growth.
The new act shrinks from that original principle by limiting the nature and extent of inclusions in a DC bylaw, by limiting the standard to which municipal services are planned and by imposing arbitrary exemptions and reductions on the funding of legitimate growth-related costs. The result? These costs will be thrust on a municipal tax base that is rapidly approaching saturation with the downloading initiatives and who knows what tomorrow will bring.
Let me illustrate with a little background on how London has been evolving and on how our ability to finance growth will be affected by the proposed legislation. We are a geographically large, single-tier municipality. In 1993, we nearly tripled in size as a result of an annexation of predominantly rural lands. Our population today stands at around 340,000, and we expect to continue to grow at a moderate pace in the decades ahead.
To prepare for growth, we undertook a planning process called Vision London between 1993 and 1996. That entailed a significant amount of public input, including the development community. We now have a strategic vision and a new official plan and a number of infrastructure studies, and these studies bear most directly on London's situation vis-à-vis the proposed legislation. The studies contain information on the dollars involved in growing London, and it is these costs that I want to now draw your attention to. They're set out in the table.
You'll see the bare bones are that sanitary servicing will cost approximately $235 million; stormwater management facilities, $76 million; water facilities, $140 million; and roads, $264 million. These costs, about $715 million in total, are not all attributable to growth but over 80% are, around $600 million. The proposed legislation would require us, in simplified terms, to kick in at least 10% of these costs from tax or rate-supported sources, ie, $60 million.
While I'm pleased to see the amendments introduced by the minister this morning, they still don't go far enough. Contrast the $60 million that I just referred to with the total size of the city's capital budgets, which are around $43 million in 1997. Of the $43 million, only about $5 million comes from taxes raised in the year in which those expenses are incurred. It appears that it is from this small pool of $5 million per year that we are to fund the municipal copayments of 10% and 30%. Ponder that for a moment. If we didn't do a single thing but raise money for the copayments, it would take us about 12 years just to come up with that money. That provides nothing for the usual non-growth capital demands of maintaining roads and sewers, replacing capital equipment and investing in technology that are involved in maintaining the infrastructure in our community.
The picture should begin to get pretty clear: The city will be faced with some mega-infrastructure spending in the coming years, and the competition for dollars to finance its future will be enormous. The provisions in this legislation regarding municipal copayments by themselves, even with the amendments, may be financially crippling to our community and they need to be removed.
We take similar exception to a number of other legitimate growth costs made ineligible for funding through development charges in the proposed legislation. These are:
The prescriptive provisions surrounding the commitment of excess capacity to anticipated development. Notwithstanding the draft regulation, which I've had an opportunity to briefly peruse, it still doesn't go far enough.
The automatic attribution of capital grants and other contributions, however that may be defined, to offset growth related costs. We ask, where is the allocation to the existing population?
The automatic ineligibility of various services, hospitals, parklands and the rather ominous other services prescribed by regulation, as well as the partial exemption of industrial buildings. I say that as a community where in fact we have a total exemption for industrial buildings, but that's been a matter of our local choice.
These reductions arbitrarily and irrationally reduce the pool of costs legitimately recoverable from growth. When taken together, these provisions will place significant pressure on property taxes and user rates, and they will inexcusably compromise the principal that growth pay for growth.
The province is in the process of completely transforming the responsibility for funding of much municipal infrastructure: no grants, no handouts. But with this legislation, the government is taking away the tools needed by municipalities to face the financial challenges. The principle that growth pay for growth should be preserved.
Let me now turn to a second main issue, the need to respect local autonomy and authority in growth-funding matters. We are all aware of the government's resolve to change the face of service delivery in Ontario and the unprecedented steps being taken to disentangle provincial-municipal affairs. Recently, the government initiated and released a discussion paper on the new Municipal Act, which is described as a "cornerstone to defining the new provincial-municipal relationship." The government promises greater flexibility and broader authority.
The benefits? Greater efficiency; the ability to react quickly to local economic conditions and find creative ways of providing quality services. Greater accountability; clear local authority means clear responsibility. All of this productive change is promised in the Common Sense Revolution. But unfortunately, the proposed changes to the Municipal Act are not mirrored in the development charges changes before us. Why the anomaly?
If we truly desire local accountability, then we must provide for local authority. How? We must remove the highly prescriptive provisions I referred to earlier. To recap: the mandatory copayments, automatic commitment of excess capacity, attribution of capital grants and other contributions solely to growth and ineligible services and mandatory exemptions and a very broad regulation-making power to the minister to extend those exemptions.
Consider, as a further case in point, the provisions related to standard of service delivery. The legislation calls for service standards no higher than average levels of the past 10 years. This restriction will be problematic. It was one of the big points on which the implementation task force had disagreement which continued for many, many months.
You can see here that the diagram illustrates this, with the vertical axis representing a level of service, for example, one ice pad for 20,000 people or one library for 25,000 people. The horizontal axis represents the passage of time and, with it, the increase in population. As time passes, the standards of service decline. Eventually, finances allow for construction of another ice pad; that is the first upward blip.
The difficulty that all municipalities will encounter in using a 10-year average is that over time the level of service will be ratcheted downward. This will be heightened in communities with slower levels of growth than others. The level of service being replaced will always only be the average, say, one ice pad per 22,000 people, and not the desired local level, one per 20,000.
1110
The main point of my comments about standards is that you cannot legislate such specific rules. Development charge bylaws cannot be developed province-wide using a cookie-cutter approach. The question of what's an appropriate standard should be part of local decision-making, taking into account local conditions, local needs and local input. The existing legislation served us adequately in that regard.
If we must have new legislation, it should aim to provide a principle, that services to the existing population should not be improved solely on the backs of the development community, and a process to development of policy that provides for participation and an ultimate avenue of appeal.
The city of London last updated its development charge policy in 1995. At that time, I think I can safely say, we in London chose not to pursue full cost recovery through our development charge policy. Rather, we pursued a local process that included consultation with the development community and the public to arrive at a compromise on full recovery that suits us in London. We do not know whether we will be able to afford the same discretion in the future; the pace and scope of change in municipal finance dictate against that at present. The keys, however, are that we arrive locally at a development charge policy that suits us in London and we need to maintain that local discretion.
This legislation falls fundamentally and woefully short of providing a legitimate vehicle with which our municipality can face the financial challenges of growth. The proposed legislation imposes arbitrary reductions of growth-related capital costs legitimately assessed against development at the very time in our provincial transition when we are striving to achieve greater accountability between the user of a service and the payer for a service. To us, that makes no sense, let alone common sense.
I thank you for the opportunity to present the city of London's views this morning and I look forward to your questions.
Mr Phillips: Thank you very much, Mr Hopcroft. Few people in the province probably know this stuff as well as you do, so we appreciate you being here.
Earlier, the minister said that there's about $300 million a year raised on development charges around the province. I gather that was last year, so that with more development it may be slightly larger. He indicated that of the $20,000 currently on a town house, about $5,000 is going to come off. I gather it's about a 25% reduction in development charges, which says to me that of the $300 million currently being raised, something like $75 million will be taken off.
My simplistic view of all this is that those things have got to be built, that the capital has to be built. Municipalities are not throwing money away; they're building these facilities. So if you move $75 million off development charges, it has to be paid for by the property taxpayer. I don't see any other way of doing it.
Mr Hopcroft: The other way is quite simply not to build those services, which will over time lead to two classes of citizens in our communities -- the have-nots in the new communities and the haves in the older community -- and these facilities would come under increasing pressure.
Mr Phillips: I could see you doing that short-term, but longer-term, can you sustain that?
Mr Hopcroft: No, you can't. Quite frankly, you can't.
Mr Phillips: Have I got the dimensions right, in your experience? The minister will provide us this information, I gather, but are we looking at reducing the revenue raised by municipalities by roughly 25%?
Mr Hopcroft: In London, it would be somewhere around 10%. That's because we charge far less than our development charge studies show we could charge if we wanted to recover all of the growth-related costs. We exempt industrial development. We have a significant exemption on residential as well as commercial development at the present time because we choose to do that locally.
Our development charge revenue has ranged, over the last 10 years, anywhere between $2 million and $12 million annually in total. It's somewhere in the lower end of that range right now, but 10% is still money that is a significant burden for us to try and find elsewhere, particularly when we are trying to position ourselves as a community for future growth.
Ms Churley: Thank you for your presentation. I wanted to come back to the announcement by the minister this morning about the 10% of hard services. You say in your presentation that you welcome that but it doesn't go far enough. I'd like to know, very briefly, what your major amendment or recommendation would be to this bill. Also, if there is time after that, for the time being he's exempted transit and waste management from this 10%, and I wanted to hear what people had to say about that.
Mr Hopcroft: We would welcome any extensions to that list of exemptions. We think the best solution is to have local decisions being made by locally elected councils on how to pay for growth in our communities. We don't think that legislating an exemption from Queen's Park is the way to go.
Ms Churley: Are you saying, therefore, that you'd generally like this bill withdrawn and that --
Mr Hopcroft: I would much rather live with the existing legislation than with this one. The existing legislation has some faults, but they are minor faults compared to the magnitude of what this bill carries with it as far as intruding in local decision-making and binding our hands.
Ms Churley: You don't think it's possible to really amend this to make it reasonably comfortable for your municipality. You'd rather go back to the old act, perhaps with some amendments to that.
Mr Hopcroft: If I was given two choices, the first would be withdraw it and go back to the basic principles of the existing legislation. If you have to amend it, it needs lots more amendments to lessen the drastic impact it's going to have on local decision-making.
Mr Gary Carr (Oakville South): Thank you very much, Grant, for your presentation. As I said to you in London last week, you're in before all these committees and we appreciate it. You were down on the Police Services Act and many in the past. I don't know how you find the time with all your duties, but we do appreciate that.
I agree with you on the 10%. I was one of the ones who was very critical of that and I'm glad the minister and the parliamentary assistant were able to move on that. But I was interested on page 10 when you talk about the local solution. I agree; I think most municipalities, the vast majority, are reasonable and responsible, particularly when we're giving them more authority. We basically have said that the municipalities will have more control in a lot of areas and I think they are, most of them, responsible.
Is there anything the province could do for those few that may, for whatever reasons, abuse the development charges? Is there anything the province could do to allow good municipalities like yourself to make those decisions, get the local solution? How could the province then guard against the ones that don't? Is there anything you could suggest?
Mr Hopcroft: There are two things. First of all, you can speed up the appeal process. I think people forget there's an appeal process that is supposed to be there to deal with abuses now. It's an appeal process that maybe isn't used as much as some people suggest it should be, and when it is used, it delays, it creates uncertainty. So shorten that process, fast-track those appeals.
The second thing is to deal with process. We have, I think, a good bylaw in London because we involve the development community and the public in the preliminary stages of our review and it's transparent, it's open. We saw a number of very good amendments that came forward through that process from the development community because of the impacts where Mr Watson or where others wanted to take us were things that we saw as being unacceptable in our community, given the current economic situation.
If you can make the process one where there's greater involvement at an early stage, where the studies are not kept close to anybody's vest and where you truly do involve those who have a stake in the issue at an early stage, I think you end up with better legislation, with better bylaws and a situation where you don't have the kinds of horror tales that we hear from some communities.
Having said that, I think that my limited knowledge of some of the GTA issues and some of the problems that are cited in the discussions and the negotiations AMO has had with UDI and others is that there's an appeal process there that people don't feel is working well for them right now because they can't afford to wait. If people are saying they can't afford to wait and with the economy as slow as it is right now, I hate to think of how that's going to turn out when things hopefully change of the better for us. So speed up the process and eliminate the uncertainty.
Mr Carr: Very good point. Thank you, Grant.
Mr Ernie Hardeman (Oxford): Grant, just quickly, you said under your development charges in London you presently do not charge the allowable limits that your study would indicate you could charge and for one reason or another you've decided that a lower amount is appropriate. Do you see that as a way of dealing with the 30% services, that you could use that movement in there? You charge less now. If that was the 30%, would that solve some of your concerns?
1120
Mr Hopcroft: No, not really, because when you set it in regulation or you set it in legislation, that is telling us that we have to raise money to pay for growth in a way that may not suit our local circumstances. Quite frankly, people are more prepared to pay for some services than others. Those are political judgements that we don't think should be second-guessed by others.
The key issue in my view is, are the services that we are imposing charges for properly classified as growth-related costs? Whether we choose to charge 50%, 0%, 100% or 80% should be a local decision.
The Chair: Thank you, Mr Hopcroft. Our time has expired. We appreciate your taking the time to come to Oakville today to make your presentation.
Mr Hopcroft: I appreciate the opportunity to present our views to the committee. We look forward to seeing some amendments at the end of your hearings.
Mr Sergio: Madam Chair, can I make a suggestion, please? Sometimes to split a couple of minutes at the end of a presentation three ways is very hard. Can we do it in rotation? This way we may have two or three minutes each if we go in rotation.
The Chair: I have been doing rotation.
Mr Sergio: I know, but it's splitting two or three minutes in rotation and it really doesn't give any side to ask even one question. If we were going in rotation to ask a question of whatever, if there's any time at the end, fine. If there is no time, we don't ask those questions, but to go in rotation.
The Chair: I'm being very strict in the time today. Thank you.
URBAN DEVELOPMENT INSTITUTE/ONTARIO
The Chair: Our next organization presenting is the Urban Development Institute. Welcome, Mr Kaiser.
Mr Stephen Kaiser: Thank you, Madam Chairman. Good morning. With me is Mark Jepp, vice-president of the Urban Development Institute. I'd like to thank you for allowing us the opportunity of providing our thoughts this morning on Bill 98, the new Development Charges Act, from the perspective of the land development and home-building industry.
Let me say from the outset that we fully support the government's direction with this legislation. It is founded on clear, well-conceived objectives which were set out by the minister in November 1995, all of which are cornerstones of this government's agenda.
We believe the new act will achieve these objectives and go a considerable distance to control the level of municipal services, to ensure that development charges are not a barrier to economic growth, to reduce the cost of providing new construction and to improve the job creation potential of our industry.
If I can accomplish one thing in my presentation this morning, that would be to dispel the myth that still exists in the minds of some people that this legislation is a gift to the development industry.
I want to tell you that I am passionate about the industry I represent and I personally believe that this legislation is a major step in the right direction. This industry was my summer job through high school and university in the early 1970s. I started out as a construction labourer, advanced to a framing crew and eventually supervised a commercial job site. In 1986 I joined my father and formed a small construction company and was active building homes throughout the Niagara region when the first Development Charges Act was being introduced and enacted in this province.
I can tell you that I was personally involved in the discussions, debates and, in some cases, appeals of development charges bylaws in five municipalities alone. In every case the draft bylaw was a blatant attempt to pile a shopping list of charges on to new growth, charges that were clearly the joint responsibility of existing and future taxpayers. At the same time there was absolutely no concern given to the economic impact this increase would have on the cost of a new home or a new business or expanding business.
In 1994, I joined Bramalea as vice-president of their residential operations. At that time we were building in eight communities across the greater Toronto area, from Burlington to Pickering, and I can tell you from that experience that I know first hand the crippling effect these charges had and continue to have on our industry.
In the early 1990s, as president of the Ontario Home Builders' Association, I travelled the province quite extensively and during my term I met with builders and developers who echoed the experiences that I had shared in Niagara and the GTA. I also had the opportunity to meet with Premier Harris on a number of occasions when he was still the leader of the third party. He fully understood the crippling effect that development charges have on our industry and in fact felt that their use should be limited to the traditional hard services only. Mr Harris expressed this viewpoint again in a response to a questionnaire from the Greater Toronto Home Builders' Association just prior to the last provincial election.
As you will recall, in November 1995 the Minister of Municipal Affairs and Housing announced that he too believed that development charges should be used to pay for hard services only. He imposed a qualified moratorium on all development charges until a fundamental review of the Development Charges Act was conducted.
Shortly after the review was announced, I met with Terry Mundell, president of the Association of Municipalities of Ontario, where we agreed that it would be in the best interests of both of our organizations to find mutual understanding regarding the new legislation. We relayed this decision to the minister and he gave us his full support. Actually, he delayed his process in order that we might find agreement.
Over the winter months of 1995 and 1996, our two groups met several times in search of common ground that could be embraced in the legislation. Although we did find some areas of agreement, we were unable to resolve the extent and level of service that should be funded by development charges. In fact, on May 29, 1996, AMO informed the minister that "the association cannot agree to any change in the scope of services under the act," and further that they were again "not in favour of provincially regulated levels of service."
With this initiative frustrated, UDI put together its position paper and forwarded it to the government for consideration in July 1996. That paper has been included in your material and, quite simply, it represented the middle of the road. It embodied the principle of a fair sharing of the costs between new growth and the existing taxpayer and included a host of soft services that would be eligible for development charge funding -- this to a minister who believed in a hard-service-only approach.
Our position paper was and continues to be endorsed by: the Greater Toronto Home Builders' Association; the Board of Trade of Metropolitan Toronto; the Toronto Real Estate Board; the Canadian Institute of Public Real Estate Companies; the Metropolitan Toronto Apartment Builders' Association; the Ontario Real Estate Association; and the Ontario Taxpayers Federation. I should say that missing from that list is the Ontario Home Builders' Association. They actually thought that our position paper was too soft.
Let me tell you what some of those groups have said in their letters of endorsement. The Toronto Real Estate Board said: "Our endorsement of the UDI position is a departure from our traditional stand on development charges. We believe that the current financial climate faced by municipal governments requires a rethinking of the industry position which takes into account the financial ability of municipalities to deliver services to their residents. The UDI proposal has accomplished this and we commend your efforts in coming up with a reasonable compromise to the development charge issue."
The Canadian Institute of Public Real Estate Companies said it "supports the UDI statement that a new act should specifically narrow the scope of services that are funded by development charges and clearly establish more appropriate levels of service. Further, the new system should be designed so that it directs a municipality to explore new ways of delivering services, such that all taxpayers can assess the level of service that they want and are prepared to pay for."
1130
The Greater Toronto Home Builders' Association said, and you'll hear from them later in this process, that the "UDI position goes a long way in the spirit of compromise with the municipalities. In light of the Premier's and the minister's comments on the issue, our endorsement takes UDI's position as a bottom line, not a starting point for negotiations."
Most notably, the Ontario Taxpayers Federation said that "UDI's position is a very creative, timely and welcome contribution to the debate on municipal government funding and spending. On the whole, the UDI position paper contains a number of good ideas on reassessing who pays for what and the need to downsize services. Overall the UDI's recommendations, if implemented, should result in a lower tax burden across the board, greater government accountability, a refocusing of priority and discretionary spending and an end to the `free lunch' concept."
In November of last year the new Development Charges Act was introduced, and there are no doubt similarities with our position paper; similarities, but at the same time a much softer approach than even we advocated. I ask you, did the government cave in to the developers, or did they listen in some ways to an organization that made rational and reasonable suggestions in light of the fiscal realities that are affecting the municipal sector and the development industry? Let's revisit the significant impacts that development charges have on levels of service, economic competitiveness and housing affordability.
Firstly, in terms of the impacts on levels of service, the current act states that the provision of services funded from development charges must be reasonably attributable to the need for those services that result from growth. In practice, however, the terms "reasonable" and "need" have been interpreted very loosely. In fact, UDI believes that the standards and levels of service have escalated dramatically in the 1980s and 1990s and are well above those that were attained in the 1960s and 1970s, which were seen to be quite appropriate for residents and businesses at that time. The existing act is so broad and so accommodating that it does not impose explicit requirements on the municipality to assess and provide only what is needed; to establish reasonable and sustainable levels of service; to analyse the long-term cost implications of operating, maintaining and replacing all development-charge-funded services; and most importantly, to explore alternate means of financing those services.
Development charges are often seen as a way to give taxpayers municipal facilities that in many cases they would never agree to fund out of their property taxes. Monumental town halls, luxurious cultural and recreational centres and excessive levels of parkland and related facilities all represent levels of service which municipalities have been able to provide seemingly free of charge because they have been financed largely by the development community, new home buyers and new businesses. Unfortunately, the long-term cost of operating and maintaining these facilities and the impact on the existing and future taxpayer, both residential and non-residential, is often entirely overlooked.
Quite simply, once the capital is provided and the facilities built, local taxpayers will have to pay for them indefinitely from their taxes. Fewer services and more modest facilities which would comfortably serve the community's needs would be less expensive to operate, maintain and ultimately replace. The temptation to seek these services from the development community without charge is, in many cases, distorting the municipality's financial responsibilities to all of its taxpayers.
Secondly, in terms of the impact on Ontario's competitiveness, the imposition of development charges on new industrial and commercial development and the impact of this practice on Ontario's competitiveness cannot be overstated. Development charges can substantially add to the cost of investment and will continue to discourage economic development and all of the beneficial spinoffs that accompany it. In fact, here in Oakville through the recent recession a 100,000-square-foot industrial building would have triggered a combined local, regional and school board development charge of over $600,000. This presents a major barrier to both the new business looking to relocate in Ontario and the existing business looking to expand. The expansion of the nearby Ford plant, for example, was almost lost to the United States because of this huge upfront penalty.
In contrast, many American municipalities are willing to offer industry substantial incentives to locate in their communities because they believe the benefits from employment and taxes generated in future years will more than offset their investment. Low-interest loans to assist in financing the plant's construction and extended property tax holidays to ease a business's operating costs during its early years are commonplace throughout many US markets.
In fact, serviced sites in municipal industrial parks throughout the United States are available at prices below the total amount of the development charges in many GTA municipalities. Quite simply, municipalities have concerned themselves with the development charge policies of their local neighbours only and have largely ignored the implications of unrealistically high charges on their ability to compete within the North American marketplace.
Thirdly, in terms of the impact on housing affordability, we have seen over the last five years an increasing reliance on development charges to fund municipal facilities, to the point where development charges in many municipalities are either double or triple their former lot levy rates. While the act cannot entirely be blamed for these increases, it certainly accelerated the increase in lot levies that was occurring in the late 1980s. The imposition of these unrealistically high development charges creates a huge barrier to housing affordability.
Today in the GTA the development charge represents over 10% of the cost of an average starter home, and when combined with all other government fees, taxes and charges, this cost climbs to almost 25%. Buyers of this average starter home pay approximately $15,000 in development charges, which amounts to almost $45,000 when amortized over 25 years as a part of a mortgage. In many other markets, the cost of the development charge actually exceeds the value of an average residential building lot, effectively preventing the land from being brought to the marketplace, despite the need for new housing and the municipality's desire to see the project proceed.
No one would suggest that if the price of bricks and mortar increased by 30% or more, the price of houses would remain unchanged, but somehow the development charge is viewed in a different light. While Ontario's construction costs remain competitive with those of other North American markets, its land costs, which include development charges, are much higher. Development charges are simply another cost in the construction of a new house, just like bricks and mortar, and they deny many Ontario families the joys of home ownership.
We believe the new act will go a considerable distance to rectifying these problems and will introduce some balance to this distorted situation. As I said at the outset, we believe it will help to control the level of municipal services, to ensure that development charges are not a barrier to economic growth, to reduce the cost of providing new construction and to improve the job creation potential of our industry.
This will be achieved, in large part, through five measures: The scope of services eligible for development charge financing will be reduced; municipalities will be forced to contribute to the cost of services which are eligible; the development charge will be calculated using a clearer, fairer methodology and will be required to provide more detailed accounting and disclosure; expansions of industrial facilities will be partially exempted from the development charge; and municipalities will be required to examine the long-term capital and operating costs of the services funded from development charges.
We support the principles on which this act is based and the majority of its content, but there are three critical areas which we believe require change. Under the new act, 90% of the growth-related capital costs for transit, waste management and electrical services may be funded from development charge revenues. However, unlike the traditional hard services such as roads, sewers and watermains, the cost of these services is difficult to apportion between growth and non-growth and can be funded more appropriately by other means. Transit serves a broader public good, benefiting the entire population of a municipality and should be funded equally, 50-50, by the tax base and development charges.
In light of the Minister of Environment and Energy's reform of Ontario's electricity system and the potential for a fairer, more appropriate user fee system to be established to recover the cost of hydro, we believe that electrical power should be treated as an ineligible service and totally excluded from development charges. The entire cost of waste management can also be conveniently and more fairly funded through user fees, an approach which encourages reduction and reuse, and as such it should be totally excluded as a development charge service.
1140
As you know, UDI and the GTA mayors and regional chairs formed a task force which over the course of the last three months has met on numerous occasions to diligently bring about a resolution to the concerns of the municipal sector. This has been a valuable process and it did result in a number of areas of agreement. Our material this morning includes a summary of the outcome of these discussions and we would ask that these matters be given due consideration prior to the act's proclamation.
In conclusion, we commend the government for its leadership in advancing legislation which should bring about increased fairness and accountability to Ontario's development charge system and help to contain the cost of new housing and business. It is the result of a year-long review and offers a balance to the interests of the development industry and municipal sector.
For the municipalities to suggest that the sky is falling as a result of the new legislation is a gross overstatement. Quite the contrary, the existing Development Charges Act was a real abberation from the historic norm and triggered a drastic increase in service standards, particularly in the high-growth municipalities. The new act continues to permit development charges for a wide array of services. Most importantly, the new act requires all of us to recognize that we are far from the extravagant days of the 1980s and that we must accept the fiscal realities of the 1990s which have been made necessary by so many years of living beyond our means. The time for change has come and we encourage you to move forward with the bill, subject to those amendments we have recommended.
Thank you and we'd be happy to answer any questions you may have.
The Chair: Unfortunately, there is not time for questions, but I thank you very much for your presentation.
Mr Kaiser: We had timed it actually that there would be 10 minutes left. I guess I read a little too slowly in the presentation.
ORLANDO CORP
The Chair: The next organization to present to this committee is the Orlando Corp, Mr King. Welcome, Mr King.
Mr Philip King: Good morning. My name is Philip King. I'm senior vice-president of Orlando Corp. Orlando Corp is a private real estate developer, builder and owner of industrial and commercial properties. Based in Mississauga, Orlando has for over 50 years been active and continues to be active in industrial and commercial development throughout the GTA.
Over the years, Orlando has managed to provide industrial and office buildings to North America's Fortune 500 companies. Orlando has been a leading voice in the industry regarding the ever-increasing costs of development and the long-term impacts such spiralling costs will have on the future of the GTA and Ontario. We strongly support this government in its attempts to reverse the trend in the continued increases in levels of service provided by municipalities and hence the cost of development charges.
Industrial and commercial growth is key to this province and the municipalities' long-term prosperity. Upfront development charges have a significant effect on business decisions to locate or expand in this province.
The car manufacturing industry is one major component of our economy and the recent expansions of Ford in Oakville and Chrysler in Brampton and the continued existence of these facilities in this province have been in jeopardy because of the significant level of development charges. Why do we provide barriers to such businesses locating in this province when the long-term benefits of municipal realty taxes and jobs are so key to our future? These barriers have to come down.
The proposed act provides for up to 50% expansion of existing industrial buildings to be exempt from development charges. This is one significant step in maintaining our businesses in this province. However, this is only one step. What about new businesses locating here? The upfront cost of locating a new business in the GTA is prohibitive.
I outline some basic statistics to indicate the seriousness of this issue:
Since 1990 -- that's the inception of the Development Charges Act -- there has not been one industrial plan of subdivision registered in the city of Mississauga.
In 1990, the average industrial land price was between $300,000 and $350,000 an acre and the 1990 levies represented 12% to 14% of the cost of land. In 1997, the average industrial land price is between $175,000 to $225,000 an acre and the current development charges represent between 35% to 45% of the cost of that land.
Using Mississauga as an example, the 1990 pre-Development Charges Act non-residential lot levies for city, hydro and region were around $43,000 an acre. In 1991, which is the initial development charges bylaw, that same charge went up to $65,571. That's a 60% increase from when the act came into place. Currently, the 1997 development charge for non-residential development in Mississauga is $69,615. With the education development charges that have now been put in place, that goes up to $79,000 an acre. That's a further 21% increase since 1991 and a 93% increase since 1990.
Those statistics are one major reason why new industrial growth is being prevented from coming on stream. We have to reduce this upfront cost.
We need to review how municipalities provide their services, and determine what services municipalities need to provide to accommodate growth in the short term and long term. Roads, watermains and sewers are the traditional hard services that need to be put in place either up front or in conjunction with buildings being constructed.
The proposed act includes transit, police, fire and hydro as hard services. We request some changes in this approach. Services such as transit, recreational services, police and fire are only provided when the population or business is located and hence paying taxes. Hydro is best suited for being funded by user fees. The capital costs as a percentage of operating costs are minimal and can be easily recovered by the hydro rates. One solution to reducing the non-residential charge is to exempt the non-residential charge from all services other than the traditional hard services, ie, roads, sewers and water. Non-residential growth will still pay its fair share, but later through its taxes and not up front.
With respect to other aspects of the act dealing with residential development, we recognize that a strong residential market is needed. The jobs and need for construction materials, appliances and finishings generate industry expansion and new industries.
The government, when introducing the new legislation, stated that certain principles needed to be included: make the municipalities more accountable; bring fairness to the system; create jobs; contain the cost of new homes and businesses; and make sure development charges are not barriers to new growth. The minister stated:
"Development charges will still allow municipalities to build roads, water and sewer systems, recreational centres and libraries that new residential and businesses have the right to expect. But people who are saving to buy a new home shouldn't be expected to pick up the entire tab for gold-plated services, like museums and art galleries. Those are facilities that serve all of the residents of the community and they should all pay for them over time, when they can afford them."
The new act has cornerstones which achieve the original intent of why the act was needed. They are: averaging of the level of service over time instead of peak levels; requirements for detailed accounting of how funds are spent; provisions for investigating the long-term operations and capital replacements of new services; municipal contributions for hard and soft services through cofunding at 10% and 30%, respectively. These cornerstones must be maintained in principle to enable the act to meet its intent.
1150
We were part of the recent negotiations with the GTA mayors and chairs, who have agreed on numerous items as to how the act should read in its final form. We support these changes, as far as they go. We couldn't come to an agreement on one major cornerstone of the act, that being how funds are treated and the level of such funds, commonly known as cofunding.
Currently, most municipalities provide for a 5% or 10% discount to reflect the benefit of new services to existing taxpayers and the fact that the new residents and businesses will be taxpayers too. This level of discount has not stopped the continuing increase in levels of service and costs, so suggestions by municipalities that a reduced level of cofunding or discount will meet the province's intent is not correct. History has shown us that small discounts as mentioned do not reduce costs. The 10% and 30% reductions in growth-related costs for hard and soft services set out in the act are key, and any reductions in these amounts would severely reduce the effectiveness of the act.
We need to state again what services are needed before either a homeowner or business is a resident in a municipality. They are roads, sewers and watermains. Other services, such as transit, police, fire, recreational services and libraries are services that are put in place after the homeowner or business is resident and paying the taxes. Therefore, a 30% shift in upfront costs on these services to delay payment is appropriate. The 30% reduction would be made up of contingency reductions, cost savings and then shifts to the tax base. History has shown that anything less than 30% will be lost in creative accounting and will not be effective. We repeat that hydro and waste management are best suited for user fees.
We need action now to ensure that one of this province's major economic engines is brought back to life by maintaining the affordability of houses and restoring our competitiveness in this province, and particularly the GTA. This act provides for the key services that growth needs to still be funded by growth through development, ie, roads, sewers and watermains.
We are concerned that the changes to funding of various municipal services will increase the cost of development charges. Of prime concern is transit. The removal of provincial subsidies for transit will place a challenge to how municipalities raise funds. We're extremely concerned that a very easy solution for the municipalities is to transfer the costs to development charges.
We requested the IBI Group to investigate the potential increase in the development charges if the municipalities passed on the provincial subsidy to development charges. The analysis indicated a staggering 88% increase in the non-residential charge in Mississauga. That would increase the non residential charge from $79,000 to approximately $150,000 per acre. To put that into perspective, for a 100,000-square-foot industrial building the total charge would increase from $400,000 to $750,000.
This act was meant to remove barriers to growth and help create jobs. Increases of this magnitude will shut down the non-residential development market. We compete with the US border states, where incentives are provided for industrial development. These upfront costs will severely reduce our competitiveness.
Transit is a service that is not required or provided up front. It is a service that is only required and provided when the homeowner and business are resident in that municipality. They are then taxpayers. We request that transit be shifted from the hard services category that currently under the act is funded at 90% to the discretionary or soft services to be funded at 70% or, as UDI has put forward, shared 50-50.
The services that are not provided up front will then be funded 70% by development charges, with the balance being funded through cost savings and the tax base. Claims by the municipalities that a shift in funding to the tax base will increase municipal realty taxes is misleading. What they do not state is that the tax base is expanded by the very growth they want to charge development charges. They themselves become taxpayers when the discretional services are actually required. Also, the act does not prevent them from collecting the funds for these services; it limits the amount and way they collect.
How can cost savings be achieved? A couple of years ago, boards of education told us that the cost of a new school would be $120 a foot. Today they build them for about $80 a foot. That's a 30% decrease. How did they do that? Because the province cut off the endless supply of money to the school boards.
This act makes municipalities accountable to the new taxpayers. It will make them more creative and cost-effective when their facilities are funded by the tax base. It will ensure that the services provided are really necessary and at a level that is sustainable in the long term. They will have to cut out the electronic age washrooms that reduce usage of water or require the taxpayers to pay for the increased capital cost. This is only fair because the taxpayer is the one who benefits from that saving.
This act will provide the accountability for spending development charge funds as the taxpayer ensures municipalities are accountable for spending tax dollars. Without this act, municipalities will continue to build higher levels of service with development charge funds than they do with tax dollars. We're not saying, "Don't build these services." Fund the basics from development charges and let all taxpayers, both old and new, pay for upgrades and those services that benefit all.
There's a technical issue that I'd like to bring up that is being dealt with through a committee of the GTA mayors and chairs and the development industry, and that's regarding the issue of existing agreements. We believe a deal is a deal and it works both ways. We would like this committee to recommend to the government that the provision with respect to honouring agreements is maintained in the act.
An example of the seriousness of this issue is that subdivisions that have entered into agreements and fully paid their levies as contemplated by that agreement will now be required to pay development charges as well for any remaining development. That's doublepaying. This is grossly unfair.
The final point is hospitals. This committee will hear from many hospital associations requesting that hospitals are included in this charge. Funding is a major issue, and as a company we are a major supporter of our local hospital. However, the Development Charges Act is not the vehicle for funding of hospitals. It is a provincial responsibility.
In summary, development charges increased significantly since the act came into place in 1990. Industrial charges have increased by 93% since that time. The level of service has been increased on the backs of new growth, and municipalities treat development charge funds differently from municipal tax funds.
We need controls on levels of service and costs. We agree that funding of the hard services -- roads, sewers and water -- should be by development charges. All other services are not required up front.
We therefore request that this committee recommend to the government to maintain the cornerstones of the act: accountability; containing the costs and level of service; make sure the development charges are not barriers to new growth; create jobs and be fair; provide a hard-service-only list of roads, sewers and watermains; and then move transit to the discretionary services list from hard services. That discretionary list of services will now include transit, police, fire, recreational, waste and libraries, to which at least a 30% reduction should apply. We request that you exempt non-residential from the discretional services.
Please also implement the changes agreed to by the GTA mayors and chairs and the development industry. We also request amendment of the act to ensure that agreements entered into prior to this act coming into effect would still be honoured.
I'd be pleased to answer any questions.
Ms Churley: I have a question on the long-term viability of this bill and its relationship to your industry. On page 6 you say quite categorically what you believe should be serviced under the Development Charges Act and what shouldn't. When the minister was here we had a chat about the downloading of certain services and the 40% transfer payments taken by the province from the municipalities. I think there's a very major question for your industry around long term, what it's going to mean when municipalities say, and it'll vary, "We want to raise taxes but we can't right now and we can't afford to build these vital services that the development charges used to pay for." Therefore you can't build because we cannot have communities without the possibility -- or not possibility, for sure -- of having some of these, like transit and police and all of that. Is that not a concern of yours?
1200
Mr King: We're not saying those services will not be provided. You're saying, "What is key?" What is key are roads, sewers and water. That's what's key up front.
Ms Churley: But what if the municipality, a new community, cannot afford, given their financial state and their long-term plan. Would you be open to flexibility in the bill, in that case, for special negotiations with the municipality?
Mr Hardeman: Thank you very much for your presentation, Mr King. I just quickly want to go first to the hydro. Your presentation deals with the upfront services that are required and they should be 100% on development charges. I wondered why you would suggest hydro as not required up front as one of those hard services.
The other one, if I could just put the second question, was the issue of transit. Putting it with the 70%-30%, the minister did state this morning that he was open for some suggestions on those two issues. Do you see a connection between the requirements for roads and the funding of transit? If we were to take transit out of the 100% funded or 90% funded, do you see a problem where municipalities would then require a higher level of road structure, which of course is 100% funded by development charges, to make up for not having the ability to put transit in place?
Mr King: I'll deal with that question first. It's really, I guess, is the glass full? Or is it the last drop? What has been happening is that transit is required as the last piece of development comes on stream, while in reality everybody will benefit from transit. We recognize that transit is going to be needed. We're saying, place it where it is most effectively funded. That's not all through the development charges. Yes, get growth to pay a portion, but get the balance to be paid through the tax base when they're there because that service is not provided until after that new industry or new homeowner is there. It's not provided before they get there because it's not needed then. That's what we're saying: There's a balance of when and how the thing is funded.
With respect to hydro, in certain instances, yes, you need to provide for facilities up front, but the development industry, in developing their subdivisions, put all the cables in the ground to provide for that subdivision. The additional cost of feeder mains or feeder cables can be funded very easily through the rates and it benefits everybody, increasing the long-term grid pattern. That's of benefit to everybody.
Mr Phillips: I'm trying to get a dimension on how much your recommendations would move off the development industry and on to the property taxpayer. You mention in here about hospitals being a provincial responsibility. The government has made the decision that they are heavily a municipal responsibility for capital, because they've determined that a substantial portion of the capital has to be raised locally. That's already determined. How much do you think should be moved off the development and on to the property taxpayer?
Mr King: Again we're talking of the taxpayer. We seem to be drawing a line as to what is growth and what is a taxpayer. The new businesses and new homeowners will be taxpayers. This act does not have any say from that new taxpayer. We're saying, let some of the payment of that be shifted to later on in the process when that new resident or new business becomes a taxpayer. The tax base is then expanded and they have a say. We're not saying those facilities are not to be built. They will be built. It is how it is funded, and funded over time rather than putting these costs up front before the new business or new homeowner gets there.
The Chair: Mr King, thank you very much, on behalf of all the committee members, for taking the time to come before us this morning. We appreciate it.
Mrs Marland: Madam Chair, I think Mayor McCallion has been delayed and I would ask the indulgence of the committee because I think the next deputation, the GTA/905 Healthcare Alliance, is here. We could flip, if you wouldn't mind.
Mr Phillips: Sure. We want to hear from Hazel.
The Chair: Okay, thank you very much then.
GTA/905 HEALTHCARE ALLIANCE
The Chair: I ask for representatives from the GTA/905 Healthcare Alliance to come forward, please. Hello. Welcome to the committee this afternoon, and if you would like to just take a moment to introduce yourselves.
Ms Virginia McLaughlin: I am chair of the GTA/905 Healthcare Alliance. My name is Virginia McLaughlin. With me today is Dr Jim Armstrong, who is executive director of the alliance. We are representing the 17 public hospitals in the regions of Durham, Halton, Peel and York that are the members of this alliance.
We formed this voluntary federation two years ago primarily to address the common issues arising from the exceptionally rapid population growth which we have been experiencing for a number of years. It is expected that this exceptional growth will continue well into the future. With our population growth currently two to three times the provincial average, approximately one half of all the growth in the province of Ontario over the next 10 years will take place in our four regions. Thus, we have a particular interest in the subject of development charges.
Currently, hospital components of development charges are not widespread across Ontario. It is primarily the larger regions experiencing significant residential growth that have decided to have such a component. Where there is a hospital component, it is not a large proportion of development charges. Generally it's $200 to $500 per residential unit, or approximately 3% to 5% of most development charges, which average $4,000 to $8,000.
For example in York region, where my hospital is located, the regional development charge is approximately $6,000, and it includes a hospital component of only about $200. But this relatively small amount has yielded valuable contributions to the necessary developments which have taken place in recent years in York region's hospitals.
Members of your committee from high-growth areas will be familiar with the significant increased demands that growing populations place on our hospitals. Not surprisingly, the growth in births has been paralleling the population growth. For example, population growth in York region over the past 10 years has been approximately 75%, and births at our hospitals have increased 60% in that period. To take another example, visits to the emergency department at my hospital have doubled in the past 10 years. These increases are not primarily a result of the established population going more often to emergency but rather to the increased population adding its share of health care needs. We believe adding hospital capacity to serve this increased need is appropriately funded in part by development charges on the houses that the added population purchases.
1210
As you know, the largest portion of hospital capital funding comes from provincial allocations through the Ministry of Health. Currently, we have the Health Services Restructuring Commission making recommendations in various locations around the province for capital expenditures as part of hospital restructuring. Under the commission's capital funding guidelines, we expect that 70% of these costs will be funded by the provincial government, with 30% left for local hospitals and communities to fund. As I am sure all of you know, hospitals in this province have an exceptional record of successful fund-raising to support their development and services. However, the scope of development that is going to be required particularly in the high-growth areas makes it even more important now than in the past to have local government contributions.
We also believe municipal contributions are very appropriate when you consider the importance of economic development to a community. It is well recognized that community infrastructure, including in particular quality health care, is an important factor in economic development. Take for example the automotive manufacturing industry, a major economic engine of the greater Toronto area and more generally in the Ontario economy.
Wearing my economist's hat, I appreciate why auto company executives say that the location of plants in Canada has been influenced by our health care system. They note that health care is now a bigger cost of production than steel. The business case which we would put forward is that development charges for hospitals are an investment in the economic future of an area as well as in the health care needs of its citizens.
Specifically regarding the proposed legislation, we would like to see hospitals moved from the "ineligible" list in clause 2(4), to the "eligible" category in clause 5(6). You will note that police and fire stations are also in that "eligible" category. Surely hospitals are as much an essential service and merit similar eligibility.
On behalf of our 17 member hospitals and the residents of Durham, Halton, Peel and York regions, we thank the committee for this opportunity to make a presentation on this important issue. We urge you to amend Bill 98 to allow the inclusion of hospitals as necessary services eligible for development charges. We would be pleased to answer any questions you may have.
Mr Clement: First of all I want to thank Virginia and Jim, and certainly the group they represent, for being here. I want to say for the record that this group has worked with members of the caucus who reside in the GTA/905 and have been very helpful and constructive in ways to ensure that the agenda of the government moves forward, but also that we recognize some of the special needs that are facing our communities. I just wanted to put that on the record.
One of the underlying philosophies behind this particular piece of legislation is to focus the municipalities on some of the traditional expenses and charges that relate to the municipal function and ensure that there is adequate accountability for those charges that typically are shared by the community, rather than on the new home buyers.
One of the arguments I have heard in relation to this particular prohibition for hospital capital funding is that this is typically something that has ordinarily been the purview of either private donors or the provincial government, to lead the way in that particular area, so that there is an integrated and coherent way of delivering on capital construction in these new areas. That traditionally hasn't been funded out of the development charges. It's a relatively new thing probably because it's a new challenge that's been faced in the 905 area. That's the reason why hospitals would be seen as an excluded category rather than an included category.
One thought that has been rolling around, just as we have separate education charges, and I wanted to put it to you: Is there an avenue, or is there the possibility of a mechanism, or have you had discussions with the Ministry of Health to pursue that if there is a special circumstantial need where everyone, perhaps including the public, could have a say about whether they wanted to include this as part of a development charge or a property tax or what have you, that would move to the Ministry of Health just as the Ministry of Education has a lot to say about education development charges?
Is that perhaps part of the way we can ensure that municipalities are not directly involved in things they traditionally aren't involved with but that there is a way to recognize that special circumstances might occur as well?
Ms McLaughlin: I can honestly say we haven't had discussions along those lines. Traditionally, hospitals were funded two thirds-one third, with two thirds coming from the province and one third coming from the local community, and in the case of regions such as my own, York, and also Peel and Halton where there are development charges, the regional municipality funded a portion of that one third -- certainly, generally speaking, not the whole one third but a portion of that because it was seen to meet the needs of that new and growing population.
I think it's fair to say that at least in the hospital sector, those guidelines have been observed. The only thing that was eligible for development charges usage was growth in existing programs for the new population. The examples we have used are emergency and obstetrics because it's so clear because that those are a result of growing populations. There may certainly be other ways of insuring that the capital is in place, but I must say we haven't looked to the ministry for special discussions on that.
The Chair: Mr O'Toole, one minute.
Mr John O'Toole (Durham East): No, my question has been asked.
The Speaker: The official opposition?
Mr Phillips: I appreciate your being here. I think probably all of us have been involved in -- I used to be chairman of a hospital board and involved in fund-raising for expansion, scraping around for money. You have indicated 30% of the future capital. I think that is a little bit problematic; it may be 30% or it may be 50% that you have to raise, depending on the interpretation.
Ms McLaughlin: That's right.
Mr Phillips: But there is zero doubt that in Halton and Peel and, I guess, Durham there will be substantial needs in the next few years for capital.
Ms McLaughlin: In York too, all four regions.
Mr Phillips: Yes, all four. Can you give us some indication of how much total money the hospitals anticipate they'll need for capital over the next five or six or 10 years and what percentage of it is currently being raised by development charges? Have you any indication or any idea on that?
Dr James Armstrong: It is very difficult. Of course, with the restructuring commission coming, we expect to get a better indication of what they estimate will be the development requirements. Each of the areas has been, over time, looking at plans. In Durham and York region there are acute care studies that were conducted, and the York region one did estimate somewhat the requirements, but not a complete estimate over that kind of time period. So it's very difficult to answer that. We'd be in a better position after the commission has reported.
Mr Phillips: I'm just trying to get a feel for the total amount that's going to have to be raised and what is reasonable under the current development charges, because I gather under the proposed bill you essentially will not be permitted any development charges.
Ms McLaughlin: That's right. It will be zero. In York region it's my recollection that the acute care study identified $75 million worth of capital that would need to be invested in two of the three hospitals, because one is a new facility. But in the two older facilities, in order to help them meet the needs of this growing population, that's the total bill and a portion of that would come from provincial moneys. That amount is unclear -- it may be 50%, it may be 70% -- because it is tied up in the restructuring commission. The balance would have to come from the communities themselves ie, fund raising, major capital campaigns and or the regional level of government from development charges.
Mr Phillips: It might be helpful for our committee if your group had just a ballpark figure. I'm just trying to visualize in my mind how much money you're going to have to raise over the next 10 years and how much reasonably would come from development charges that have to be raised some other way.
Ms McLaughlin: I'm sure we could provide you with that information.
Dr Armstrong: We could do a gross estimate. Certainly in Durham, when we did a preliminary analysis in discussions with the regional government there last year, it was a similar order of magnitude to what was just --
1220
Mr Phillips: Seventy million?
Dr Armstrong: Yes. If you extrapolate that across the whole 905 area, you might be looking at something like $300 million, which sounds like a lot, but even just for the restructuring in Metro Toronto, $150 million was identified as the immediate kind of restructuring requirement, and the system is of course more developed in Metro at this point than in 905.
Mr Phillips: So maybe $100 million would have to be raised locally, of the $300 million, roughly?
Dr Armstrong: You're looking at a pretty substantial challenge in terms of the historic fund-raising levels that we've had.
Ms Churley: Thank you for your presentation. Before I get on to hospitals, I want to thank you for bringing up a point that I was thinking about earlier but didn't have time to raise when others were presenting, and that is, on page 4 you say you appreciate why auto company executives say the location of plants has been influenced by the health care system. It's a very important point to make because so far, and there are two sides to these issues, we have heard from some of the developer industries the case that some business has not been building here because of the high fees attached.
I certainly would be interested to see some kind of case study because I'm sure -- I'm not denying that there are examples on both sides, but we must bear that fact in mind as well and try to find the right balance there. Of course, my concern about this bill is that it tips way over to the other side of that and our communities are going to be hurt, which gets me back to your point about hospitals.
If we have a situation where municipalities do not feel that they can raise taxes more, which is becoming the trend, especially with governments now starting to reduce taxes, and more and more services are being downloaded, including health care and long-term care, on to municipalities, and communities like yours are expanding and new communities are being built, isn't there a concern that at a certain point a municipality like yours is going to have to start saying no to new development? In a couple of circumstances in Toronto, when I was around Toronto city council, school boards and residents were saying no to much-needed new social housing in the area because they were unable to afford to build new schools and things like that. Isn't that also, on the other side of the coin, a concern that could detract from new development, if you don't have these good services or the ability to expand these services for expanding communities?
Ms McLaughlin: I would suggest that when a business is looking at a place to invest, they look at the whole picture. They look at the availability of an educated workforce, they look at costs like land, servicing, health care, the cost of health care. As you know, the cost of health care in Canada is relatively attractive compared to that in the States for businesses, and that's one reason that Canada becomes attractive. This is really the argument we were referring to.
People, when they want to move into a community, are also looking for things like schools, parks, libraries, fire and health care, and hospitals are a major component of health care and the provision of health care. So I would say the whole thing is an entity and you really can't have one without the other. You need the services and you need the people, and the people look for the services and business looks for the services, and when they're there, you have a healthy economy.
Ms Churley: Thank you for that. In answer to my question, my concern again is, if we want more growth because it helps the economy and all of the reasons that go with that, and you're talking about your expanding community, what if there is no money, given all of the changes, to expand these hospitals and to build new schools and that sort of thing? What is going to happen to new development? At some point, is the municipality going to say, "I`m sorry, you can't build here because we can't afford to give you the services?" At a certain point hospitals can only serve so many people, right?
Ms McLaughlin: That's right. But I really can't speak for the municipalities. They have to make their own decisions based on all of the pressures and all of the things they're facing. As hospitals, our job is to provide for the needs of those residents and we do it in the very best way we can. Given the challenges we have, we get on with the job of doing it, making people aware of the challenges so they can hopefully, especially the funders, meet our needs. But our job is to meet the needs of our community from a health care point of view.
The Chair: Ms McLaughlin, Dr. Armstrong, thank you very much for taking the time to present to the committee this morning. We appreciate your best advice.
GTA MAYORS AND REGIONAL CHAIRS
The Chair: We'd now like to hear from the GTA mayors and regional chairs group please.
Mrs Hazel McCallion: Thank you very much. We are very delighted that we've had the opportunity to come. I'd like to call on Ann Mulvale, the mayor of Oakville, who is the co-chair of the task force set up by the greater Toronto area mayors and regional chairs to deal with this. We appreciated the agreement of the minister to extend the time as well as to recognize our team of Mayor Cousens, Mayor Mulvale, myself and our staff to do the negotiations with the Urban Development Institute. I'll call on Ann to make a few opening remarks.
Mrs Ann Mulvale: Thank you Mayor Hazel, Madam Chairman, members of the committee. As the minister announced this morning, we have been involved in negotiations with the development community on behalf of the municipalities, working closely with the province, and we support the amendment he announced today on the 10% withdrawal from the deduction for hards. We support it wholeheartedly.
We support the gross to paid share, we support the need to recognize there are some benefits to growth and that some benefits flow to existing residents. That's why before we reach that number we have already discounted for that growth.
We support many of the statements that have been made, and the library handed it very well in terms of the state of the housing market. When this legislation was envisaged, as it has already been said, Mike Harris was the leader of the third party and the market was very different. I won't try and reiterate the reference points that have been made by the library delegation. The deputy mayor of London, Grant Hopcroft, both in that capacity and in his negotiating role on behalf of the association of municipalities, made a very strong case as to why the local ability to make decisions is paramount. We endorse that.
Indeed, the very topic, the very name of your act, "An Act to promote job creation and increased municipal accountability...," does not fly, in Grant Hopcroft's submission, at all. Municipal ability to make local decisions gives us greater flexibility, enshrines that flexibility to ensure that we work as partners with the intent of the legislation.
I was pleased to see Phil King make early indication of the negotiations and success of those negotiations between the GTA mayors and regional chairs group and the development sector and the province. It is regrettable that Stephen Kaiser, despite his historic journey, almost alluded to it as an afterthought, because we have made substantive progress, which the minister has acknowledged today, by taking away the 10% of hard services.
We believe very strongly that further clarifications and further amendments are necessary, and Mayor Hazel, on behalf of the mayors in the GTA, will be speaking specifically to that. There are outstanding issues. Much has been mentioned by at least two, if not three, speakers on the impact of industrial growth. We have made those changes already, and that is why it is regrettable that UDI didn't speak up front to the changes that have been made.
To look at the cost of housing in isolation without looking at customer-driven changes in evolution -- from the journey that Stephen started as a student, much has changed with the sorts of things customers want as well. Of course, municipal costs are not just what drive the cost of housing. The province has the ability to change sales tax on building projects, on GST. There are all sorts of changes that have taken place, so to have a historic journey, no matter how charming, without anchoring in that environment of change and all those other impacts, really is not terribly helpful to this committee. I personally regret that his time allotment wasn't handled so that you could ask him some questions, because I think you'd have some very good questions of him.
1230
To say as he did at the end that it's erroneous for us to say the sky is falling -- it was a gross overstatement? Well, my friends, my political colleagues, it's a gross overstatement to say that DCs and municipalities are the only problem that the housing industry has. We have the hottest housing market, as I believe by submission of the library person, since 1988. We have the lowest interest rates in 30 years. We have the tradespeople back working.
Our job is to continue the partnership, the success that has taken place with the negotiations to date under the umbrella of the GTA mayors and regional chairs, as witnessed by the amendment already put, and to continue to amend this legislation so it serves all the people of Ontario, whether they be on the business side or the residential side and not in any way to distract from the momentum that's there. That's the challenge. The municipalities are part of the solution; we are not the problem.
To position where we stand today, Mayor Hazel will now take over the podium.
Mrs McCallion: We have provided for you today a letter with attachments which outlines the position of the GTA mayors and regional chairs on this very important subject. That position was unanimous at the meeting on Friday, held in Brampton.
The Chair: Excuse me. Just if I can interrupt for a moment, it's been asked that it be distributed at the end of the presentation, so that will be coming.
Mrs McCallion: Yes. The issue of development charges legislation, which is permissive legislation -- I want to emphasize that. You don't have to charge them if you don't want to, and you can play around with them if you don't wish to. In other words, you can reduce them from what is established by the legislation or you can eliminate them for industrial-commercial, as some have done, and reduce them for residential. That's permissive, and we've been asking for permissive legislation in this province for years to give us the ability to make the decisions.
It is critical to the future of our communities as we try to provide the services that our communities, both yours and mine, have come to expect from living in this great province. The bill that is before you today proposes to change what for years has been a very good piece of legislation. It has given many of our new communities the services, both hard and soft, that we need in order to continue to meet the needs of our new residents. I would again add that these residents are as much residents of our province as they are of our cities. What we do today and what you recommend will have a significant impact on the future development of towns and cities. It will also have a tremendous impact on the taxes that our residents pay.
The original premise of the development charge legislation was very simple: New development would pay for itself. The new bill proposed to change that basic premise and pass part of the costs of the new development on to the taxpayer in general. We strongly object to this change. The bill calls for a cofunding arrangement for new development in the future. Under the proposals contained in the bill, hard services would be funded 10% from the property tax and soft service would be funded 30%.
This morning the minister made the changes. We are pleased to learn that this morning the minister has announced the elimination of the 10% for hard services, excepting transit and waste. For the latter two, he is awaiting the outcome from these hearings, so you can rest assured we have a suggestion to make.
We also strongly believe that the 30% funding of soft services from the property tax must also be eliminated. If not, what this means is that regardless of how efficient we become in planning, scheduling and tendering our new road services and community centres, this bill will force the older neighbourhoods to pay a portion of the cost. That's why I think the minister has made that change. He realizes that on the hard services they would be forced to pay part of the capital cost of the expansion.
If Oakville had collected development charges for a new community centre in the amount of $2 million and, through the proper staging and timing of the tender and detailed review of the cost, the tender came in at $1.5 million, this would still force the taxpayers to pay 30% of the cost even though it is already 25% less than what was budgeted.
This is the cofunding issue that I'm sure is understood completely by all those who have been dealing with it. We have found even in the municipalities that cofunding had to be explained. I don't know who came up with the idea; it was a great idea on behalf of the development industry.
We are told by UDI that the reason they support cofunding is because it will force the local politicians to think twice before they proceed to develop these facilities. Well, we think a lot already before we do things, and I want to say that local government in this province and in the country has a much better record financially than either the provincial or the federal governments, and I think we should say that. Sometimes people don't really appreciate that our record is much better than the provinces, and I'm speaking of all provinces, and the federal government. We think a lot already before we do things. I think we're noted for it.
Part of what makes communities whole is the public. Can you imagine what the reaction there would be if we told a new community that was 80% built out that we could not build a community centre for their children because we could not afford it? New families move to these communities because of how we plan the community and integrate the amenities. The developers use these amenities to sell their homes -- they do it in Mississauga, I can assure you -- and yet now they want to take them away. The local councils are elected to make those decisions, not UDI.
We have worked very hard over the past two months to attempt to arrive at a consensus position on this legislation. We have met many times with UDI in an attempt to reach agreement on many points in the legislation, and we have indeed reached agreement on 20 issues. It is, however, these final issues that are most important to us, even when UDI landed things on the table at the last minute, like farm assessment. Secondly, they want us to deal with hydro. As you know, hydro is the responsibility of hydro commissions and not our responsibility as municipalities. If we are forced to use existing tax dollars to fund new development, then we fear we will not be able to properly serve our residents.
This government is in the process of making tremendous changes to the way they fund municipalities. Our traditional sources of subsidy and grants are being eliminated. Generally, we support these changes because you have promised to replace the lost revenue with opportunities that will allow us to operate more like a business and raise funds from sources from which we were previously restricted.
What this legislation does is remove one of our existing sources of revenue. We cannot work with reduced revenues from the province and at the same time be expected to pass the cost of new development on to our existing taxpayers. We need every cent we can get our hands on just to pay the cost of keeping the existing infrastructure in place. Siphoning off these much-needed dollars to pay for the new development just doesn't make common sense.
Madam Chair, I hope you and the members of your committee will amend the legislation to ensure that the taxpayers of this province do not have to do without and do not have to pay the cost of providing those community services that we all take so much for granted. We will work with less, but we cannot accept placing the costs of development on the existing tax bill. Developments simply will not proceed because we will not be able to afford it. All of the resources that we have at our disposal are needed to keep our existing communities safe and healthy. New development must pay for itself.
The question I ask the committee is, if the province is going to legislate a reduction in the levies, how will you guarantee it will be passed on to the new homeowner? Are you going to legislate the price of houses? That's the only way it can be done. The market determines the price of houses. Are you going to legislate what amenities go into a house? The builders are advertising three bathrooms, a fireplace in every bedroom, a finished basement, a sauna, a pool in the backyard. Are you going to say those things are not permissible because they increase the price of houses?
I've rushed through this in order to allow you to ask questions as we would appreciate questions as to how we can solve the problem that, in my opinion, is permissive legislation, and I want to emphasize that. Why does the province want to regulate and take away from us that right they granted us?
1240
Mr Phillips: I appreciate the advice of the mayors -- the well-regarded mayors, I might say. This morning the minister said that he expects the price of a house to drop $5,000 as a result of the legislation. I'm just trying to get from you -- and I think in your last moment you indicated -- if this bill goes through, what will it mean to development in Oakville or Mississauga? What do you think the impact might be on future development?
Mrs McCallion: I think our position is very clear. As you know, we've led the greater Toronto area and led Ontario in development as a city. I can assure you that when we froze development the first time the legislation came out, our phones were full, both council and mayor, of calls saying, "Thank God you've finally wakened up and are stopping development in Mississauga," because we have taken a lot of development and the citizens are concerned with the traffic situation; more are they concerned with the lack of school accommodation. There isn't a school built in Mississauga the day it opens that there aren't portables on the site because of the lack of funding of the provincial government over the years -- not this government -- for schools in growth areas of this province.
I can assure you that a freeze on development would be warmly welcomed in Mississauga. My council doesn't want to do that because we really believe we want to create jobs and we really believe that we want to create the necessary mix of housing for the industry we're also attracting to our city, so we hope that the province will not place us in that position.
Ms Churley: Thank you to both of you. In a very short time you gave a very good presentation. Some of the points were made earlier when the minister was here and unfortunately we did not get clear answers on those. The point about the guarantee about the housing prices going down accordingly was one that I raised as well. There is no guarantee, of course.
I wanted to ask you, would you prefer to have this bill withdrawn and to go back to the existing Development Charges Act with perhaps some amendments, or do you see some possibilities within this new bill with amendments? Where would you like us to go from here?
Mrs McCallion: First of all, as you know, I was on the Who Does What panel and so was Grant Hopcroft. We dealt with the development levies and recommended to the province they leave them alone. That was our recommendation.
Ms Churley: Why do you think they are doing this, in that case?
Mrs McCallion: I believe it was a pre-election promise. On the front page of their last bulletin, Mr Kaiser of UDI quoted the Premier as saying that there should only be development levies on hard services. Obviously there were discussions with UDI before the election and I believe that was the situation.
Ms Churley: Do you know of any others?
The Chair: I'm sorry. We'll go on to Mrs Marland.
Mrs Marland: Mayor McCallion, another thing that Mr Kaiser said this morning was that he wanted to destroy or dispel the myth that still exists in the minds of some people that this legislation is a gift to the development industry. Then of course he went on to reconfirm his previous statements about development charges being used for monumental town halls, luxurious cultural and recreational centres and excessive levels of parkland and related facilities. I know how long you've had a real concern about some of Mr Kaiser's misleading statements, particularly about the Mississauga town hall.
Do you think the answer to some of these problems, if UDI wants to destroy the myth, would be for the municipalities to be more willing -- I know Mississauga has a full open-book policy on where the charges are raised and where they're spent. Do you think that it has to be better managed, either through this legislation or regulation, how municipalities raise their charges and how they spend them in a public way?
Mrs McCallion: Yes. That came up at the Who Does What panel. The representative of the Minister of Finance said there are municipalities that have been reported to them by UDI that do not follow the legislation. In my opinion, that can be corrected by the province if they're not following the legislation. If there's any lack of clarity in the legislation, let's clarify it; I agree. I have no problem with it being legislated that we open our books to the developers; no problem at all.
But I want to clarify one thing -- and I'm glad you raised it -- and that is yes, Mr Kaiser has publicized that development levies were used to build our city hall, our civic centre in Mississauga. That is a completely false statement. Even though he was prepared to tell me that he would get a former employee of the city of Mississauga to sign an affidavit that they were used, I have never seen the affidavit and we've even written a legal letter to Mr Kaiser to withdraw the statement.
There are a lot of myths out there and a lot of false impressions, but if a municipality doesn't follow the Assessment Act and it doesn't follow the Municipal Act, I can assure you the province should take action on them.
In answer to your question, which I don't think I answered, we are prepared -- there are municipalities that may be building facilities that may need some control. That to me is a case of sitting down with the developers in your respective community and discussing that issue with them as we do on all our building codes etc with the committee in Mississauga. We bring the home builders in. All these things can be determined.
The only reason that the development industry supports the hard services -- and I'm sure they will not object even to Mr Leach's statement -- is that you can't build a subdivision unless you have the pipes in the ground, but you can build a subdivision and bring in 30,000 or 40,000 people and have no place for the kids to play ball, to swim or to go to a library. You can do that, but you need the water and you need the sewers and the roads.
We take exception that transit is going out of the hard services, and I'll tell you why. You, the province, have just announced that we're going to be responsible for GO Transit. Now isn't that great? We haven't the slightest idea what the capital costs of expanding GO Transit are. That came up at the last minute by UDI, to drop transit, after the government made the announcement that we would be possibly taking over GO Transit.
The Chair: Mayor McCallion, I'm sorry to interrupt. Thank you very much for taking the time to come before us this morning. Mayor Mulvale, we also appreciate your taking the time to come as well and particularly for the hospitality exhibited to us here in Oakville today.
Mrs McCallion: Madam Chair, I just want you to know that this is the unanimous position of the mayors and the regional chairs. I also have a slight idea what they may do. I don't want to threaten, but I'll tell you I'm concerned because I think we've got the economy going in this greater Toronto area and I don't think we should be interfering with getting it back on track.
The Chair: Thank you, mayors.
1250
PEEL REGION HOSPITALS
The Chair: Our final group this morning is representatives from the Peel region hospitals. Hello. Welcome to our committee today. Please introduce yourself for Hansard and for the members of the committee as well.
Mr Richard Dixon: Good afternoon. My name is Richard Dixon and I'm vice-president of the Mississauga Hospital. Scheduled to be with me here today was Janice MacNeill from Peel Memorial, and she is unable to be here now. I should also add that our president and CEOs are attending an important growth funding meeting in downtown Toronto.
The hospitals of Peel region -- Peel Memorial, Credit Valley and Mississauga Hospital -- are very pleased to present to the committee today concerning the very important matter of the future development charges in our hospitals. The population of Peel has grown in leaps in bounds in the last 10 years to the current population of almost 800,000, with a real expectation of reaching the one million mark within four years. This overwhelming population growth has made the provision of health services very challenging.
Let me quote some interesting statistics from the Fraser Institute of January 1997: GTA/905 people wait 20% longer for elective surgery than in Toronto; they wait 27% to 150% longer for diagnostic testing than in Toronto; and the GTA/905 has over 50% of the population, yet only receives 27.7% of the health funding.
Also, in a survey in October 1996 by the Angus Reid Group the following key points were found. People travel to Toronto for health services because of three significant issues: Their specialists are in Toronto; the facilities and equipment are perceived to be better in Toronto, which is a part of my rationale for making this presentation today; and the unavailability of some hospital services in the GTA/905 area.
The Health Services Restructuring Commission in Metro Toronto has just released its report, with millions of dollars being allocated for capital projects as the enabler to the change in health care delivery. The commission is now turning its attention to the hospitals in the GTA/905 area, which include York, Durham, Halton and Peel. Their report, expected later this spring, may also identify numerous capital projects for our hospitals. Under the commission's capital funding guidelines, the provincial government will fund 70% while the local hospital and community fund 30%. Hospitals in the Peel area will be expected, along with their communities, to provide capital funding to improve their health facilities and provide new and/or replacement equipment. The sources of the local funding are from three principal sources: development charges, hospital capital reserve funds and fund-raising.
Development charges are a fair and equitable mechanism for capital funds to be provided for hospital capital projects. Peel region has had a process in place through lot levies dating back to 1974, with substantial investments being made in all three Peel hospitals. Currently the Credit Valley Hospital is investing development charge funding to expand their emergency, diagnostic imaging, ambulatory and laboratory services. The Mississauga Hospital has just used a portion of its development charge funds for the installation of the region's first magnetic resonance imaging unit and completely redeveloping a rapid response lab and installing a state-of-the-art angiography unit. Peel Memorial is just about to expand its obstetrical and special care, ambulatory care and renal dialysis services. In Peel, development charges are being put to good use for the people in our community.
Development charges for a municipal residence building, excluding educational development charges, in a region such as Peel would be approximately $5,000, with the hospital portion being only $540. By removing such a nominal sum from the cost of home building, it is extremely doubtful that this will encourage more home purchasing. The hospital component of municipal and educational development charges are only 5% to 7% of the total charge. Also, there is no guarantee from the Urban Development Institute that this cost reduction will be passed on to the consumer.
Development charges for hospitals are a small potion of the total charge, yet yield great improvements to the delivery of care in our hospitals.
Hospital capital reserve funds will be required to match the growing population demands as well as the imposed capital projects from the Health Services Restructuring Commission, and these are limited.
Fund-raising is extremely competitive. Hospital foundations concentrate their efforts on raising money for capital equipment such as MRI. It is difficult for the same fund-raisers to be knocking on corporate and community doors for bricks and mortar.
Several members of this standing committee represent communities in the GTA/905 area and know how important hospitals are to the public we jointly serve. Under Bill 98, hospitals are excluded from development charges and in the same ineligible category as museums, theatres and tourist facilities, while the government has given a higher priority to fitness centres, swimming pools and baseball diamonds, as well as police and fire stations. Even lawnmowers are included in development charges for recreational centres, while basic lifesaving components of a hospital are excluded.
Surely committee members and the public believe that hospitals are as important as the police and fire departments. Hospitals are where our children are born, where our friends receive lifesaving services in emergency and where our relatives receive necessary health and wellness services. At the same time, emergencies and obstetrical units are faced with significantly higher demands due to the increased population growth in Peel region. The emergency departments in Peel hospitals service approximately 200,000 visits annually, with nearly 11,000 births in our obstetrical departments.
The members of this standing committee on resources development should also be aware of the linkage between hospitals and the economic development in Peel. The region of Peel boasts some of Canada's most prominent companies: Northern Telecom, Spar Aerospace, Nissan Canada and Baxter Corp. These companies have obviously located in our community because we provide a skilled workforce that is supported by high-quality, low-cost health care. This is an extremely significant point, as a healthy worker is obviously more productive than a worker who cannot access the local hospital physiotherapy department.
Hospitals need the investment of development charges to support the transition of care from inpatient to ambulatory services, improvements in medical technology and the basic infrastructure enablers. For example, a gallbladder removal five years ago involved an invasive operative procedure with a stay in an inpatient unit for up to 14 days. Today this is a day surgery procedure. The change in process requires less inpatient and more day surgery space and equipment. It is brought to reality through capital investments, which involve development charges, the outcome being improved quality to the patient, with a lower operating cost for the hospital and the taxpayer.
The region of Peel and the three hospitals in Peel have recently reviewed the development charge methodologies. The result was a very successful process of allocating the current and future funds through a detailed set of guidelines, which are a model for the rest of Ontario: All funds are to be linked to population growth and not a ratio of beds per population; growth is linked to a past recognition of population plus future increases; projects must have Ministry of Health and district health council approval; capital funding is first sought from the Ministry of Health; growth component could be up to 100% or a variation, depending if a service is provided on a regional basis; non-growth projects funded only by the hospital and the Ministry of Health; projects in approved region of Peel list have been evaluated by a third party. We are pleased to share these guidelines with this committee.
On January 15, 1997, the region of Peel council passed a motion supporting the development charges guidelines, that future funding be supported in high-growth municipalities, and they supported our issues in the GTA mayors and regional chairs forums as well as with the Ontario Hospital Association.
The hospitals in Peel region strongly believe in the need to change the Development Charges Act, but it is essential for hospitals to be included under these key provisions: local decision-making by regions and municipalities; development charges applicable for hospitals at 100% cost recovery; hospital projects submitted to Ministry of Health and district health council for approval; hospitals eligible for up to 100% growth component of capital projects.
On behalf of our patients, community, staff, physicians, volunteers and boards of the hospitals of Peel region, we wish to thank the committee for the opportunity to present this important issue. We urge you to support the inclusion of hospitals as necessary services in Bill 98. Thank you very much.
1300
Ms Churley: Thank you for your presentation. We need to get a commitment from the government soon that this will be amended, if nothing else. I believe this is going to blow up in the government's face, given all the other issues out there now around hospital closures, that even within this bill it's not seen as important enough to leave in. I think that's something that the faster we're told it's going to be included, the better off we'll be because, just as the mayors were saying earlier, people who have kids are not going to move into a community if there are no schools or community centres or places to play.
My father, who is getting elderly, just had his second heart attack, and probably my parents are going to have to move out of their home. I can assure you that when they're looking for a place to go from here, the hospital and availability of hospital and health care are going to be the number one priority. In growing communities, if that kind of guarantee is not there, and I speak again to the development industry, it's cutting its own throat in the long future because people are not going to want to move into communities unless those kinds of amenities are there.
I know I've given a speech. I guess I'm just backing up what you were saying so very well, that we must include hospitals in our community planning or the communities will be unworkable.
Mr Dixon: Thank you. Hospitals are a part of the community. Any other questions?
Mr Galt: Thank you for your presentation. Certainly I also recognize the tremendous importance of hospitals that you've expressed. Just thinking in terms of rural Ontario, where there's a very large number of municipalities that would be served by a local hospital, how would you propose that they would look after development charges for a local hospital and then for a referral hospital that may be off in the distance, such as in Toronto? How would they divvy that up? Do you see that this would be practical?
Mr Dixon: From the discussions in our very positive process with the region of Peel, I think we are quite open to redefining the context of hospitals to include health services, so in a rural community, and our example is in Caledon, where there is not a hospital in Caledon although they are served from outlying hospitals -- there are and can be services that can be available to them, not the formal hospital but hospital or health services in the world of integrated delivery services -- that those other services in that provision of health be included in development charges. We are with you on that point. Health care is more than hospitals.
Mr Clement: Thank you, Mr Dixon, for being here. A lot of your presentation related to how to grapple with massive growth in the regions and how to grapple with that in the context of health care. I just wanted to say for the record, of course you're well aware the government of Ontario has changed the JPPC funding formula to recognize future growth in our regions because of the priority for the delivery of better health care for our area. The hospital restructuring commission's report, I think the minister has already indicated that he's looking at it from a GTA-wide point of view so that some resources perhaps could go into areas where they are needed.
The question is how to pay for that growth. Are you saying, quite apart from the changes I've just outlined, that there's a need to specifically pay for that growth through the development charge? Is that what you're saying, that there's no way to deal with this particular item other than through the development charge?
Mr Dixon: Development charges only form one part of the process. I mentioned earlier that fund-raising can be a part of that, hospital reserve funds can be a part of that. I happen to be part of a hospital that does have reserve funds. But the majority of hospitals in Ontario do not have reserve funds and that will be further eroded by the imposed hospital restructuring in nominated capital projects.
The ability to go elsewhere, as UDI have also proposed to us, is to have user fees in hospitals so that they would pay for part of the development. That's completely unacceptable to us, to the public, and contrary to the Canada Health Act.
We have explored with our association and with our other stakeholders the other mechanisms for capital funding, but I highlight that development charges -- we are not looking solely to that source for all our funding. Some hospitals do have other funding mechanisms.
Mr Clement: Just one final quick question. I didn't see any reference in your paper about the current state in Peel of the impact of the development charges. Did you want to state for the record how much is reserved already in Peel?
Mr Dixon: I stated earlier that our process in Peel goes back to 1974, and to date approximately $60 million has been collected. We have undergone a process of allocating that between growth-related projects to our hospitals. In our hospital case we have about $60 million ourselves in proposed projects within allocation from development charges of approximately $24 million. That still leaves in excess of $36 million, the far majority of that balance, that the hospital would have to fund itself, and that will be extremely difficult for us to do.
Mr Sergio: Thank you very much for coming and making a presentation to our committee. You have mentioned that the provision of health care and stuff like that is one of the essential services that local municipalities currently provide. With the restructuring that is going on now we may have health care provision, hospitals all unloaded on the shoulders of the local municipalities. Do you believe that it should be the local municipality then saying where and how much money they are going to expend, let's say, to make provision for those local services? I believe that health care, hospitals, fire and police are all essential services that should be there prior to any new development being built. Can we have your comments on this?
Mr Dixon: Yes. I'll see if I understand your question correctly. We believe firmly, as do mayors Mulvale and McCallion, that growth provides the incentive to expand. It's absolutely essential in our component that that take place because, just to try to re-answer the earlier question too, the availability of other capital funds is extremely limited. There is not in other parts of Ontario growth taking place, and if they don't have any growth, they shouldn't have any large rationale for changing their health care facilities. If we look at the growth that's taken place in the past in Peel plus our future growth, it is exceedingly high. So we're trying to provide, within the context of almost one million people in the next four years, health services and hospital care with only three hospitals.
Mr Sergio: Instead of having one blanket law, for example, as is being proposed, you believe it should be left up to the local municipality or community to decide what and how they should be provided.
Mr Dixon: Right. That is actually part of the formal motion that was passed by the region of Peel, that that jurisdiction be left up to the local municipalities to decide, if they want to do it and how much they would like to do that with.
The Chair: Thank you very much, Mr Dixon. We appreciate your taking the time to come before the committee this morning with your presentation. We'll listen intently to your good advice.
Mr Dixon: Thank you very much.
The Chair: This committee stands recessed until 2:10 here this afternoon.
The committee recessed from 1308 to 1416.
C.N. WATSON AND ASSOCIATES LTD
The Chair: I call to order the afternoon session of the first day of hearings on Bill 98, the Development Charges Act. The first presenter is from C.N. Watson and Associates Ltd. Welcome, Mr Watson. You have 20 minutes to present. It must include either your presentation and/or questions from caucus members.
Mr Cameron Watson: Thank you very much. We appreciate the opportunity to say a few things to you this afternoon. I guess we are saying it on the basis of the experience that we've had over the last 10 or 15 years with development charges and lot levies, and the first page of our submission talks about that experience.
I won't bore you with it but I will just say that we have over the last number of years carried out about 50 studies on behalf of land owners, fiscal impact studies and land market studies, and on behalf of 250 municipalities, utilities and school boards we've carried out development charges studies or similar studies. Most of the work in the GTA and across the province we have been involved with, so we have a perspective.
I will start by saying that obviously Bill 98 represents a substantial rewrite of the existing act. I think it does clarify and tidy up a number of problems with the existing act and I think that is good. I mention at the top of page 2 a number of sections that I would cite as examples. I guess there are a number of problem areas, but there are three problem areas I'd like to talk to you about, in my view. They relate to: first of all, the calculation of the charge; secondly, the municipal contribution; thirdly, the reserve fund draws. Finally, I just have a few comments on matters that have been raised relative to the purpose of the legislation.
On page 3, in terms of the calculation of the charge, as you are well aware, the nine steps are set out in subsection 5(1) of Bill 98 and what I want to speak about first of all are paragraphs 3 and 5.
Paragraph 3 says that the increased need must not result in the level of service in the calculation exceeding the previous 10-year service level average. That's fine, I guess. I think it was necessary to make a change to the service level test in the existing act.
The first concern I have is in situations where there has been a provincially mandated increase in the level of service during the last 10 years. I would use storm drainage as an example, where you have stormwater treatment required which you didn't have required 10 years ago. It seems to me that the 10-year service level average is meaningless if what the municipality has to put in place is a current-day standard as mandated by the province. I don't see anything in the regulations that deals with that. It's in the regulations of the existing act, but somehow or other it has not been carried through.
I then go to paragraph 5 in relation to paragraph 3. Paragraph 5 says that the increased need must be reduced to the extent that the increase in service involved would benefit existing development. That's fine, that's clear and that's what's been done to date. If that means that the increased need is established as being, say, 100,000 square feet of some facility and the municipality decides it's going to build 110,000 square feet, then you have to net off the 10,000 square feet because that's going to take the municipality beyond the 10-year service level average and therefore it's a benefit to existing development. We have no problem with that interpretation.
However, if that is not the correct interpretation and if what is meant by these words is that when the municipality builds the 100,000 square feet, if there is going to be any use of those facilities by existing residents, then you've got to net that off the cost, then I suggest we have a problem because, particularly with soft services, you have existing residents using new facilities, you have new residents using existing facilities throughout the municipality; you can't segregate these things. As long as the municipality has not acted so as to augment the 10-year service level average, then there isn't any benefit, I suggest, to existing development. Even though the new facilities may have some degree of joint use, there is no benefit to new development and there should be no net-off. I just want to make sure that's what the words mean because it seems to me that's not necessarily what they say.
The second area of concern relates to uncommitted excess capacity. We now, as of this morning, have the definition of uncommitted excess capacity, if that helps. The questions I have are at the bottom of page 4. The first question is, how is non-debt financing of excess capacity to be cost-shared? In other words, a municipality clearly is providing services in advance of need -- it has to do that -- and if it has done that without incurring debt, then we don't have a trigger for section 68, which says it can recover debt. I wonder whether the act and the regulations would permit it to replenish the source that was used to provide the excess capacity. I'm not sure they would. There are a few other comments that relate to the same question.
The third area of concern relates to the matter of capital grants and subsidies, and I understand this was raised this morning by Mr Hopcroft. The problem there is that of course grants and subsidies are netted from the cost, but when you net them in paragraph 6 and you move through those steps in order, what you're doing is taking the entirety of the capital grants and subsidies from the growth-related costs. The problem is that the grants, the subsidies and the fund-raising in many cases aren't attributable to the growth-related costs. They are attributable to the non-growth-related costs. They are things that the existing community has raised for its share of the cost.
If that's what the words mean, then I think that's unfair and a municipality should not be required to net off the entirety of the subsidies and the fund-raising from the growth-related costs, because that's not what they relate to in many cases. It should net off whatever portion of the subsidies relate to those costs.
The final area of concern on the calculation is the percentage reductions, the 10% and the 30%. I say that the basis for requiring any municipal cost share for sewer, water, roads and electrical is not clear to me and I guess the minister this morning has basically said the same thing. Quite obviously, it is not prudent to put financial obstacles in the path of getting servicing put in place in a timely way, and that surely is the fundamental purpose of the legislation, to enable the municipalities to have access to a funding source which permits them to get the servicing done, if you don't want to have them endeavouring to find a 10% share or a 30% share. The municipal cost percentages are unduly onerous. I don't have further comment on their magnitude; I think many submissions have been made by the municipalities in that regard.
The next point is on the municipal contribution, and really that's what section 36 of the bill says, that when a municipality spends from its reserve fund, it must produce a copayment, the 10% or the 30%. The problem I have with that is that no matter how economically a municipality proceeds, no matter how good a job it does in reducing costs and reducing its development charge, at the end of the day it's still got to come up with 10% and 30%. I don't think that's fair. I don't think that provides much of an incentive for a municipality.
My recommendation is that you delete, expunge, section 36 and subsections 42(4),(5) and (6) altogether. Leave subsection 5(6) in, which has perhaps not 10% and 30% reductions in the costs, but whatever percentages ultimately arise, 0% and 10%, or whatever it might be, but don't require the municipality to produce from its own funds the matching share. Leave with the municipality the ability to go out there and get the cost down lower than what was estimated for the purposes of the development charge, reduce its standards to phase projects and so on, so that it has the potential for escaping full payment of that cost share. I think there is a better incentive there.
The fourth point is on reserve fund draws. I just want to make a simple point that section 35 indicates that those draws only be for capital costs underlying the determination of the charge. I think that's fine so long as a municipality has discretion to adjust project funding in accordance with actual costs and with changes in project definition and priority as they occur. Otherwise I presume a municipality would have to go back to the public and amend its bylaw every time there was a change in its program, and I think that once again would put obstacles in the path of getting the servicing in place. I think that's unduly rigid and inflexible, so I just want to make sure there is sufficient flexibility in the way in which the wording is expressed in terms of draws. I don't know that that flexibility is there.
In terms of comments on the objectives of Bill 98, I certainly fully endorse the underlying objectives of the bill to remove barriers to economic growth, to ensure that municipal servicing is as efficient as possible and to make new homes more affordable. But as I've said, I think the fundamental purpose of this legislation is to provide municipalities with a source of capital financing which is sufficient to permit needed services -- "needed" underlined -- based on reasonable standards, to be put in place properly and expeditiously. I don't think you want too many obstacles introduced in the interest of helping the municipalities to be more efficient that might interfere with the "expeditiously" part of this.
The next point I comment on is the statement made by the minister that development charges are one of the major contributing factors to bringing apartment building construction to a standstill. I have two simple suggestions. The first one is, if the magnitude of development charges is having that effect, you can deal with that quite readily. First of all, with respect to education development charges, as you may or may not know, the education development charge for apartments is exactly the same as the education development charge for single detached dwellings and it's that way because the regulations require it to be that way.
For seven years we have been suggesting, to anyone who listens, that that's not fair and ought to be changed, because the people yield from apartments, as you might imagine, in many cases is far below the people yield on single detached dwellings. The proper charge for apartments would be far less, in some cases up to $1,400 a unit less, and that's in some cases 10%, 15% of the entire charge on apartments, municipal, school and otherwise. That's been sitting there for seven years.
1430
The other point is that the GTA Task Force and many other studies have made the point that in many instances higher-density intensive development has the potential to produce economies with respect to servicing. You get lower use of water per capita, you get lower trip generation, all sorts of things, but there is no requirement in the legislation that the true servicing costs for higher-density development be put in place. So what is done in most cases is simply to say: "An apartment has an occupancy which is about half the occupancy of a single, so that's what the charge will be. We'll assume that the per capita demand for service is the same." But the per capita demand for service isn't the same, and by putting in the legislation requirement that that be looked at a little more carefully, you'd find the apartment charge going down again, and quite possibly by something like $1,000 a unit. There are two, to me, relatively simple means to get the charge down without throwing out the act wholesale.
The next point made, once again by the minister, was about industrial development. I am certainly mindful of that, I understand the importance of that, but the example given was $200,000 on 100,000 square feet; that's $2 a square foot. I would just point out that the total cumulative charge for industrial development in the GTA in most cases is $3 to $4 a square foot. I am agreeing with the statement of the problem, but the problem is twice as severe as the statement.
You have all kinds of examples with municipalities where they have exempted industry, reduced the charge, phased the charge, cut the charge, but you have regional municipalities, you have area municipalities, you have the utilities, you have the two school boards all imposing industrial charges, and it accumulates. In the GTA it accumulates to $3, $4, $5 a square foot. You have a lot of interest in that little bit of tax room, and it may just be that in the interest of strengthening the province's competitive position some other funding sources should be found for part of that.
The last page I have is just a few comments on some remarks that were made this morning that I'll provide input on, with great respect. The first was the statement by the minister that despite the best intentions of the act in 1989, something has gone fundamentally wrong with the way with which the act has been put in place and the charges, in effect, have got out of control. I guess you can look at it in different ways. The way I look at it, in the GTA the charge for single detached dwellings, the median charge, was $13,500 in December 1989. We know that because we did a survey and we were paid by the Ministry of Municipal Affairs to do it. The median charge right now in the GTA is -- I'm sorry, $9,200 in 1989. The charge right now is $13,500, the median charge.
In that time the highest charge has gone also from about $13,500 to $20,000. So the highest charge went up $6,500. But the median charge in the GTA in that seven-year period went up $4,300. The table on page 10 shows you in approximate terms why it went up $4,300. Fourteen hundred dollars was in for cost inflation; there was actually more cost inflation than $1,400 but the municipalities didn't put it in place. Eight hundred dollars was there because costs were moved from individual subdivision agreements to the charge. That was a requirement of the act. So there is no increase; it is just a transfer from individual subdividers' accounts to the development charge. Eighteen hundred dollars was there because the province said, "We're now going to have education development charges"; they didn't exist in 1989 and they now do. Three hundred dollars was there because of hydro; there were few hydro charges in 1989 but not many, and now you have it as a wide spread element.
That accounts for what happened. I don't consider that to be an abuse of the process or anything particularly out of line. I think it's quite fair to say, in justifying the need for change, that circumstances today are different from circumstances seven years ago. We have to get costs down and we have to get charges down and we have to get house prices down and we have to get employment up. I think that's fine, but I don't think it's necessary to derogate in the process what has occurred over the last seven years. Thank you.
The Chair: Thank you very much. We have one minute left per caucus so I caution you to have your questions very brief. We'll begin with Mr Clement.
Mr Clement: Are you suggesting then that one of the solutions for the 70% is to look at discounting?
Mr Watson: I'm not sure I understand your question.
Mr Clement: If you've got a particular charge for a particular service, the developers look after the first 70%, and if the municipality could find the savings to render less than 30% in terms of delivering the same service at less cost, it has the flexibility to do so?
Mr Watson: Yes. I wouldn't use 70-30 myself, but whatever the percentages are, yes.
Mr Sergio: Mr. Watson, thanks for coming down and making a presentation to our committee. Would this be something that you would favour, let's say, to leave it up to the individual municipality to deal with the development charges if they are too high or too low, to let the local municipality decide, suiting their needs, arranging that with whatever developer may be in that particular municipality, to make sure they can make it out among themselves; or should it be blanket legislation governing every municipality by imposition?
Mr Watson: Blanket legislation has its place. I think the Development Charges Act of 1989 has introduced many positive changes, and if care is exercised in how much control is administered, I think the legislation is good.
Mr Sergio: With any flexibility for local municipalities?
Mr Watson: Yes, I think there should be flexibility. For example, with industrial charges we have municipalities in the GTA that are basically hot markets for industry and industrial development charges are interfering with that very much. You have much of the rest of the province that is not in that position. Most of them don't have industrial charges anyway because they're trying to encourage industry. Then you have a few, perhaps a couple of dozen municipalities, that do have significant charges, so you wonder whether you need legislation that's province-wide to deal with very specialized situations.
Ms Churley: Thank you for your presentation and some of the technical aspects. You have looked at it very closely; I think more closely than most. We had Mayor McCallion and Mayor Mulvale in here this morning. I don't know whether you were here for that presentation, but they are certainly reflecting what I'm hearing from mayors of all political stripes: that this is not needed legislation; that in fact there is a building boom going on now in a lot of their municipalities and that there are a lot of other market forces at play that determine the cost of housing, building booms and all of that, and that this is missing the mark. You mentioned some of them around departments and stuff that can make a lot of other changes that would better the situation. Would you agree with that?
Mr Watson: I would agree that there are a lot of forces affecting housing prices. Between 1989 and now, house prices, as we all know, have gone down. Development charges went up, house prices went down. They went down because the market went soft. So there are all kinds of factors involved. In the next few years house prices may well go up, even though development charges go down. It's pretty hard to track one to the other. But I have trouble -- you put several questions in there.
Ms Churley: I know. That's what happens when you have a minute. We've gotten good at that.
The Chair: Thank you very much, Mr Watson. On behalf of the committee, we appreciate you taking the time to come before it and offer your advice.
1440
LEBOVIC ENTERPRISES
The Chair: We would now like to hear from Lebovic Enterprises. Mr Cherniak, please. Welcome, Mr Cherniak.
Mr Lloyd Cherniak: Good day.
The Chair: Your presentation is just being passed out now.
Mr Cherniak: I'll be brief, especially after hearing the perpetrator of most of our development charges speak. I might have a different view of the issue than Mr Watson does, although I might be more similar to Mr Stamm, but less extreme.
By way of background, I've worked in development in the GTA since about 1975, for Canadian Pacific or Marathon Realty. For the last 17 years I've worked for Lebovic Enterprises. It's a development company that does large-scale residential subdivisions in the GTA and we also have a very large industrial-commercial portfolio which we presently maintain. We're active now primarily in Pickering, Aurora, Ajax, Richmond Hill and Stouffville.
Briefly, I want to take an example which I've used back from about 1981-82 when we had a recession previously. At that time most of our development was still in Scarborough, as there were significant lands undeveloped in Metro. In that recession both the federal and provincial government had decided to provide grants to first-time home buyers. We were in the position of having some subdivisions which were ongoing and we were able to take advantage of this, but the basis was that the house had to be under $100,000. These are not mathematical statistics or by a statistician; this is what the government wanted and this is what we had to produce. So we built ourselves a variety of these houses on 30-foot lots and we sold them for $99,000.
I use this as an example because today, in looking at our sales brochures, the same house would be slightly less than double the price. Of course, some of that would be accounted for in frills that people today are looking for, and secondly, there have been some increases in construction costs. But really, what has caused the change? Why did we see such a big rise in the last time?
Certainly when I look at our values of what we're selling lots for to builders, they're very similar today. This is not because of huge land profits. I look at our profit margins on house construction and they're pretty lean, as they were in the 1980s, so I would say they're pretty similar. The biggest increase is clearly the increase that has gone to government, and by far the largest of these increases is development charges.
At that time when we were building in Scarborough, we didn't have development charges, we had lot levies. These were calculated based of the existing law at that time, which said they could be hard costs and they must be attributable as a result of new development. We would sit down with Scarborough's works departments, we would see what specific roads had to be built or which sewers service new development and then we would calculate what was the growth in the municipality by looking at the official plan or the actual developments, and the bottom line was less than $1,000 a lot. These again are facts; they are not statistics and they are not averages, as Mr Watson likes to use. This is what we paid.
At that time when we dealt with the Scarborough Public Utilities Commission, we had to pay the cost of burying hydro because Scarborough felt that it was a new suburb and it didn't want to see poles and wires. That's the only charge we paid for hydro. We didn't have to pay for basic installation because the utilities would collect that from the users. As an example, today we are building on 30-foot lots in Aurora and our development charge on that lot is $17,589. In addition, we pay for planning studies. We have all the land losses due to environmental issues of the day. We're required to construct all the hard services, and we even build the hydro system.
The federal government, unfortunately, has now added GST to the land component of the purchase price, which by my calculations on this size of house would add another $4,200 to the cost of new houses. Neither of these two costs apply to resale houses. Therefore, the cost of a new home has been increased by about 25% solely for development charges and GST, both forms of taxation that do not apply to resale homes but are directed solely at new homeowners.
My current fitness guru, Susan Powter, has a phrase called "Stop the insanity," and I believe it's time this happened with development charges. Many municipalities have got on this sort of drug dependence of providing for taxpayers through new homeowners instead of proper and equitable taxation principles. New developments should clearly pay for direct infrastructure costs. We're not denying that. But soft costs are also collected in property taxes, utility fees or personal income taxes. It's time that user fees covered the proper business plans of municipalities and PUCs. This double tax collection should be discontinued.
In terms of the introduction of the Development Charges Act by the Liberal government, there was a false promise of accountability, in my view. Where have these vast sums of money gone that people collected? Certainly the building spree of new city halls is an obvious example. The copayment provisions proposed in this bill will finally bring some reality and sense to this problem.
Another area of concern on my own part has been the lack of use and cooperation with front-end financing. We've been involved with a development in Ajax which, as far as I know, is the only example in the province where this provision has been used. Rather than get into the details, which I am sure others will do, we simply urge you to review this provision to make it workable and perhaps give some teeth to the existing right of municipalities to use the "best efforts" provisions to collect from benefiting future developers. It surely becomes onerous when we have to build a large and expensive system and there is no way to recoup the money. Certainly it would help us to do these projects knowing that we could collect in the future.
In regard to industrial and commercial development, I ask you, why have a development charge at all? At the very best, industry would pay for external roads or sewers but certainly not, for example, for waste disposal, which is a private cost paid directly by industrial tenants. I heard Mr Watson, but in my example in Aurora, commercial-industrial tenants pay $48.86 per square metre development charge, working out to $4.70 a square foot. We currently own buildings and have serviced land which we're trying to rent for $4 a square foot a year in Aurora. The cost solely of construction of a factory in Aurora is around $40 a square foot, so you can clearly see there is already little or no profit for the land, and that means even the servicing of raw land, so how can this levy really be paid? Again, do we have to drive prices up until they're the highest in North America? Surely we can stop the insanity.
We need to compete globally. As an example, several of our tenants in Aurora have moved operations out of the GTA and simply ship from Atlanta or elsewhere in the United States. I can give you those examples if you want. We must be competitive and work together with governments to lower our costs, as we in industry have been doing in the last years.
Finally, by way of comparison, there are very few jurisdictions in the United States that tax new growth. One of the few places in our travels where we've seen it is in California, where it's called "extractions." The result has been some of the highest housing prices for comparable product in the United States. We therefore support the government's initiative to reduce superfluous cost to new housing as proposed in Bill 98, and hopefully get us closer to the $99,000 starter home, instead of keeping the price of housing beyond the reach of the first-time home buyer. That's my submission.
Mr Sergio: Thank you for coming with a presentation to our committee, sir. There's a number of what we call at the local level "essential services" that the local municipality usually provides to the community, and some of those are police, fire, ambulance, recreation centre facilities, libraries and so forth. They are being left off in the legislation here. Do you believe those are essential services that communities should be provided prior to building towns and home subdivisions, or should they be built afterwards?
Mr Cherniak: What I'm saying to you is that the existing homeowner does not pay for those facilities except in his property taxes. Nobody built those things for him; they exist as part of that community. I'm not denigrating them, but there are collective and property taxes. There were many times when municipalities debentured in the past and built services, and then they had to think about what they built. Today you're saying, let the new homeowner build it, and I'm saying to you, why? There is no reason for that.
1450
Mr Sergio: What you're really saying is, build a new community there but don't provide fire protection, police protection, a library for its people; don't provide hospital care, although for a hospital it is a larger area of course. Is this what we are really hearing?
Mr Cherniak: That's not what I said. What I said was, if you buy a house in Markham and you buy it as a resale, you don't pay a development charge. You get to use the library. How is it funded? You pay your property taxes. Why is it different for the new homeowner? Why should they pay for a new library to be built, when it may not be needed?
Mr Sergio: Another brief question: What if this new development were to infringe the services? To provide to this new subdivision, here or wherever, what if those services were to infringe on an existing community? Should they be paying the whole shot? Let's say the sewer capacity is not enough to provide for this new subdivision here. They have to improve the sewer capacity throughout this existing community. Do you think the existing community should bear the brunt of a flooded basement every time it rains because of a new subdivision up the street?
Mr Cherniak: When you talk about a library, I go to libraries. I very rarely see a lot of people in them. When I lived in North York and grew up there, we had libraries there too. Now I go to Markham and I see a beautiful facility with a big fountain and nobody in it. So fine, let's build another one. Let's build 100 of them, just because it's a new homeowner. You show me where you've got statistics to show that libraries in the GTA are so overcrowded that every new house should pay so much a house to build another one, and then I'll believe you.
We're not here to say that developers shouldn't face problems or new homeowners shouldn't face problems created by growth. What we're saying to you is this airy-fairy number crunching that comes up with these statistics is not reality. Show me how a person can afford a house in the GTA if we don't get some sense into this discussion.
Ms Churley: I believe this is the first day before this committee that there are a number of issues that there are some real fundamental disagreements on between the municipalities and developers. There are some community groups coming forward -- we haven't heard from a lot yet, there will be more -- but in particular we heard health care advocates this morning focus more on hospitals but expanding into health care and real concern that that's been taken out, and the sense that fire services and others are absolutely essential. Given the fact that there is downloading perhaps in long-term care and hospital closures and all kinds of other restraints on municipal financing, there is real concern about that. What's your opinion? You just expressed your opinion about libraries. What's your opinion on hospitals and health care in expanding or new communities?
Mr Cherniak: Well, you and I have disagreed in the past so --
Ms Churley: Perhaps we would agree on health care.
Mr Cherniak: I don't understand how health care has anything to do with development charges. I don't see this in the act, I don't see it in front of me.
Ms Churley: So you think the development charges should absolutely be just bare bones, in the ground, what's needed to service that house: your water, sewage, wires in the ground, and that all the rest of the community needs are to be supplied by the local municipality and taxpayers, and God forbid, if the money isn't there, then you'd prefer to walk away from developing because the community can't afford on its own to provide the services in a fiscally tight situation, which is what mayors are saying to us will happen.
Mr Cherniak: Where is health care in Bill 98?
Ms Churley: It's not. There's concern.
Mr Cherniak: So why are we talking about it?
Ms Churley: Because people this morning, and we'll be hearing from others, believe that it should be, that it is an essential service and that it's a tiny component of what's being charged now in some municipalities, and they have great fears that it's not considered an essential service in an expanding new community.
Mr Cherniak: It seems to me that we're closing hospitals, not trying to build new ones, so I don't understand your point. Our company contributes substantially to health care through charitable donations, but I don't see that in Bill 98. I don't think this is the forum for that approach, nor do I see what it has to do with it.
Ms Churley: I'd be happy to provide you, as the clerk would, with some of the presentations this morning because I don't have time to explain it to you now, but it might be worthwhile then for you to take a look at it to see what the concern is. I'm sure the Chair is going to cut me off any second now.
Mr O'Toole: Thank you, Mr Cherniak, for your presentation. The presenter before you, Mr Watson, as you know, was one of the persons who developed the quantum or the formula, and I'm asking you a question here: Do you think you're implying that the formula they developed, for which by the way he was a consultant for many municipalities, was a standard hybrid where the level of service was kind of a level of service that was spread across many municipalities that might have been higher?
Mr Cherniak: He was hired by all these municipalities, he was doing them all, so he had a certain rationale which he just used.
Mr O'Toole: I guess the argument might be that the market itself determines the price of a house. We've heard that a couple of times, and that the market has risen and fallen with some rhythm to the economy itself. However, the tax rate never seems to follow that parallel rhythm. Do you think there's something we could be doing here to look at it in a different way totally and to allow the development charge to be some other kind of formula? We're fixing a certain amount, and indexing that amount, by the way. That's how it works. Yet the price of a house itself can fall and we've seen this presented as -- is there some other way of defining this formula, where it follows the roll of the economy? Technically taxes never go down, they always go up. Do you understand?
Mr Cherniak: We have a property tax that's designed to do that. What you're doing is taking a market, the resale market, which is never quite the same as new houses and follows supply and demand and other factors. New housing, though, is an investment. People have to take vast sums of money, they have to buy a piece of land, they have to develop it, then they have to build houses, and it's not easy to raise funds if the development charge puts the actual cost of that product beyond what the person can afford to pay, or so much higher than the resale market that it is unmarketable. That's what will happen. There will be no new housing built.
That's always been the case with new housing. It's cost-driven, because any investment in infrastructure and construction cost has to receive a return. The bank won't loan us money. You'd be foolish to invest your own money. If you look at the cost of a new house at $200,000 to $500,000 and look at the money we make building that house, you'd have to be crazy to be in our business if you thought about it that way. But that's the reality of it. It's cost-driven.
The Chair: Mr Cherniak, thank you very much for taking the time to come this afternoon and present your views to the committee. We appreciate it.
1500
GREATER TORONTO HOME BUILDERS' ASSOCIATION
The Chair: If the representatives of the Greater Toronto Home Builders' Association are here, we can go ahead. Mr Dupuis, welcome to the committee.
Mr Stephen Dupuis: Thank you very much. It is a pleasure to be here. My name is Stephen Dupuis. I'm executive vice-president of the Greater Toronto Home Builders' Association. We like to think of ourselves as the voice of the residential construction industry here in the greater Toronto area. We represent the home builder, obviously, whether they're building a single detached home, a single-family or the semi, the town home, the condominium, the apartment. We represent the whole sphere of development right through to condominium conversions, which seem to be the rage these days. We also represent the infill and custom home builder and the professional renovation contractor. In terms of dollar value, that's probably 50% of the business we do. It's kind of a hidden treasure in terms of what's happening in the renovation sector.
We represent the suppliers to the industry: brick manufacturers; window and door manufacturers; drywall manufacturers, fairly large companies; subcontractors; bricklaying subcontracting companies; the carpentry companies, a lot of jobs in that part of the business; and of course the service and professional firms: architects; engineers. Garry Stamm is a member; Ken Watts is not, but those service-type firms. All told, we have more than 850 member companies. We're quite proud of the fact that we've been providing services to the members and to the public since 1921. We celebrated our 75th anniversary last year. I don't know if it's a twist of fate, but Hazel McCallion also celebrated her 75th anniversary last year.
Last year our members sold more than 20,000 new homes, and it's probably a good time to respond to a comment I heard from Marilyn Churley, I guess coming from the mayors this morning about how there's a big boom going on and we're back to the days of the late 1980s. To put that 20,000 into some kind of perspective, average long-term demand in the greater Toronto area is 22,000 units, so if it looks like we're in a boom right now, it's relative to how poorly we were doing. We're not even back to the level of demand that's needed to just fulfil the normal supply in a market this big. Hopefully we'll get to the 22,000 this year. None the less, those 20,000 homes sold last year are the equivalent of 55,000 jobs for a year, each new home built. The multiplier is roughly two and a half full-time jobs per year, so we have an enormous economic impact, and as such we have a pretty enormous stake in the legislation at hand today.
I want to go back to the last election, in approaching Bill 98, and the statement made by then-candidate and now Premier Mike Harris. Our association had conducted a housing issues survey and we obviously asked the obligatory question on development charges, and Harris's response at the time was: "A PC government will review the Development Charges Act. We believe the act must be returned to its original purpose of funding hard services. We are also pledged to work closely with municipalities to find cost savings which will make excessive charges on new homes unnecessary."
A few months later, following the election and in a speech to the Ontario Home Builders' Association, the new minister put a little more emphasis on the campaign commitment when he said, "I am concerned about the impact these charges have had on the cost of development and I think the Development Charges Act has to get back to its original purpose, that is, to fund hard services," hard services being the key in both cases, and I think it's fair to say that at that point in time the municipalities had a legitimate cause for concern because that would have rolled development charges back, rolled the clock back, a long way.
We internally had our own roaring debate about whether this was going too far, too fast, too much already. Recognizing that legislation must be sustainable and not wanting the next government to come in and roll it back to "scrap the legislation," we had an interest in making sure the new bill was sustainable. At the same time the municipalities were hanging on to the status quo as tightly as they could, but at that time our association supported a compromise that was put forward by the Urban Development Institute.
You may have heard this morning that in our support of that position we said that the UDI position goes a long way in the spirit of compromise with municipalities. We went on to say, "In light of the Premier's and the minister's comments on the issue, our endorsement takes UDIs position as a bottom line, not a starting point for negotiations."
To move forward another three or four months to the legislation introduced last November, the government put in the bank everything the industry said they would be prepared to live with or that we had conceded and much more. We had been looking for or suggested a co-payment of 50%. We ended up with 30% in the legislation, and I understand that's still up for discussion. The municipalities, in our view, had made substantial gains without ever coming to the table, but their immediate response was to freeze development, which in our view was a shameless tactic. It's one they continue to threaten and I've heard it myself many times. It's one that hopefully this government will never give in to, for obvious reasons.
With that background, if we could look at some of the issues raised in Bill 98: Under the existing act there is in our view no financial discipline imposed on municipalities. They can levy for a full range of soft services, up to 100%, and we're in a situation where most municipalities are billing for facilities without ever asking whether they need them, want them or whether they can afford to operate them in the long run. Once that new arena or recreation centre is built you've got to staff it, you've got to equip it, you've got to maintain it, you have to insure it and ultimately you have to replace it. We wonder, if the municipalities and taxpayers actually looked at these facilities and the true life-cycle costs, whether they might think twice about how badly they want them, growth or no growth.
The municipalities argue that the existing taxpayers should not have to pay for facilities required as a result of growth. I live in a new community. I've bought a new home twice in two new communities and I go to the facilities and I see lots of people from all over town in the facilities. In fact, when I used to live up in Georgina, my neighbour used to make the trip down to Aurora because it had a great swimming pool. This is the kind of thing that happens, and over time the lines of these facilities get too blurred, yet it's growth that's paying for them.
The municipalities argue that the province has cut their funding so that they need development charges even more. To me that's a signal that they just don't get it. The legislation is saying, "We need to rationalize services, we need to cut costs," and the municipalities are saying, "No, if you're going to cut us here we need to get it back dollar for dollar." You've seen these wild impact statements how cuts to development charges are going to increase property taxes by some numbers that I can't believe. I can't believe that what's imposed in Bill 98 is going to increase taxes in Markham by 30%. I just don't think the math is there. I haven't run the numbers but I would be very surprised.
When you look at development charges in the context of non-residential development, the impact becomes even more heightened. It's obvious that development charges add to the cost of billing offices, factories and commercial buildings, and we all know we live in a global society and that really the employers face few restrictions in terms of where to locate that plant. Ultimately it's a cost issue, and if we're not competitive we pay the price.
Looking at the issue by the numbers, since 1991, as municipalities have taken full advantage of the legislation introduced by the Peterson government at the height of the boom, quite different times, I might say, and at the urging of the municipalities, development charges have increased by far more than they will be reduced by Bill 98. There are many cases where development charges have doubled, tripled and even quadruples since 1989.
For our part, when the legislation came in we commissioned Clayton Research, an independent and highly regarded research house, to do an impact analysis for us. We didn't know where the numbers were going to land but we wanted to be sure that we could call the bluff if one was coming down. We found that the regional municipalities are generally facing reductions in the 10% to 20% range, but having just read the statement by the minister this morning, the impact on regional municipalities is going to be effectively nil because that's where the hard surfaces have really been sitting -- maybe 5% impact there.
Local municipalities, you're looking at reductions in the 25% to 35% range. It sounds like fairly large percentages, and there may have been higher ones where a municipality had been using DCs to their fullest extreme, whether they've got the broadest range of service. But again these are a far cry from the kinds of increases we've seen in the last five to seven years.
1510
The Oakville example here: In 1989 development charges were $7,648; by 1995 they had increased 75% to $13,404. So you've got a 75% increase there. Under the Clayton Research we had done, charges here would fall 22%, so with quick math I think that's about 47% still left on the table. The Halton regional charge would have fallen 15%, but now that's close to zero.
Markham: a 120% increase, from a little over $8,000 in 1989 to more than $17,000 in 1995. Charges there will fall 30%. When you look at the numbers, there is still 90% of increase in seven years that stays on the table. It makes us believe that the municipal reaction to Bill 98 is a little exaggerated. At the end of the day, builders and home buyers are still going to be paying some very stiff development charges, we're talking $10,000-plus a unit, just about wherever you build in the greater Toronto area. I don't think anybody can sneeze at that kind of number.
I should say what we do like about Bill 98. We like the exclusions: museums, art centres and city halls. It's obvious that these serve the entire population. Culture is not restricted to new home buyers. It is not a growth-related phenomenon by any means. The copayment on soft services is the part we really like. That's the part that forces the municipality to say: "Hey, do we want or need this facility? Are we prepared to put our money on the line?" That's the acid test in approaching these questions. The average level of service versus the highest level of service in the last 10 years is something we're asking for in the first go-round and something that's long overdue.
We have some concerns. The transit issue is still up in the air. Currently it's defined as a hard service. I see it's still 90% and not 100% as of this morning. When you run the numbers and the impact that would happen if transit was left in the hard service base at 100% or 90%, a lot of it becomes academic because those are big numbers on the cost side, and that's really going to offset some of the decreases that come from the soft service side. In our view transit is neither a hard service, certainly in the way we look at the fundamental traditional view of hard services, sewer, water and roads; nor is it necessarily growth-related. Transit moves people from all over communities and between communities as opposed to servicing just new growth. This is an issue that clearly needs to be re-examined.
In closing I want to emphasize that the decision the government must make is not whether the municipalities win and the industry loses or vice versa. The choice is really between housing affordability, jobs and economic growth versus continuation of the status quo.
I thank you for your time today and I would be glad to answer any questions you may have.
Ms Churley: Thank you very much. What would you define as the other areas of concern around problems in your industry. Surely, even though we disagree on a lot, you would agree that it isn't just development charges that get in the way, in your view, of the costs of housing. What else would you suggest be done?
Mr Dupuis: Our competition is the resale sector. We're only one third of the market, so we don't drag the boat. Prices are set by the resale market. So for us, we're at a disadvantage, and where the comparison hits the road is the goods and services tax -- development charges are an obvious one as well -- all the other regulations we as an industry face that aren't in place as they affect the resale sector. We're constantly fighting that uphill battle, and if you look at what's happened to new homes in the last seven to eight years, in the late 1980s we had a market share that was basically about 40% of the market. Through the last seven to eight years we have dropped to 20%, and I think it's fairly clear what's been happening to us. Our cost side has been growing. Our ability to get those costs recovered in the price has been totally eliminated. All of a sudden you're trying to sell GST and you just can't do it. That's our problem; it's competition.
Ms Churley: One of the things the minister said this morning, and it seemed to be very important to him in this legislation, is that the cost savings will be passed down to the new home buyer. Nobody can guarantee that. I believe, and I'm not an expert, but from my own experience in government and from what others say, that housing prices are set by the market. Do you feel comfortable in guaranteeing, and would you in writing, that any savings from development charges will be reflected in the price of the home?
Mr Dupuis: The best guarantee that I think exists is the way the market operates right now. As I mentioned, we're only one third of the market. The resale market is out there, again, determining price. That's the competition. So that's got a natural dampening effect on prices. Number two, and we're out in Oakville, but you go to Oakville, Brampton, Mississauga, Vaughan, Richmond Hill, Markham and go to any corner on Saturday and look at the signs and look at the come-ons, the competition, there must be 400 -- I think there are -- new home sites in the greater Toronto area. The Star is full of ads every weekend. These builders are falling over each other to get the deal from each other.
The Chair: So you can't guarantee that.
Mr Dupuis: No, but market forces are going to guarantee that to some degree. I can tell you that buyers -- we're at 20,000 new home sales now. We're not even at long-term demand, and the buyer is still -- we just had a first-time home buyers' seminar last week. There were about 800 people there, and we asked the question, "Is it a buyer's market, a seller's market or a balanced market?" I was shocked that the vast majority of people still think it's a buyer's market, that they're in control. The builder is seeing that in the sales office because these people shop, shop and shop and compare, compare and compare and they don't leave a nickel on the table when they're looking for a house these days. That's good discipline. If there's one good thing that's come out of the recession, that's probably it.
Mr Young: In the same vein, you imply that our act is giving financial discipline to the municipalities. Following up on Ms Churley's question, in making housing affordable, which is one of our goals, is there any way you can think of that we could help demonstrate that the development charges going down have lowered the cost of housing? What I'm thinking of is the possibility of perhaps posting development charges somewhere on the signs on the street or in the documentation, whatever, to make the market even more competitive.
Mr Dupuis: One of the ways you can do it, and I say this with great caution, is to actually make them an adjustment on closing so that it's very clear for the purchaser to see.
Mr Young: Do your members support that, do you think?
Mr Dupuis: Some have done it, mostly in times where something just went up dramatically and they've been trying to be sure they're covered either way. The other way is to have the municipality collect them directly, and that way they can answer all the questions about them too. That would be my first choice. Second would be making it an adjustment on closing. It's a pretty big pill to swallow, because those adjustments on closing could start to look like $30,000.
Mr Frank Sheehan (Lincoln): I don't know if you're the right person to ask this question, but I was intrigued by the presentation made by the Orlando Corp. He went into quite a bit of detail on pre-Development Charges Act and on the commercial and industrial land. Mr Cherniak also dealt with it.
Can you comment on that? I didn't get into the other cycle or I would have asked him. What effect is this having on the overall efficiency of government? It seems to me that with these costs, nobody's going to invest because they've got to go someplace else. I guess the next question is, where are these people going to work who live here, who are buying all these houses?
Mr Dupuis: I was going to say this whole issue cuts both ways because we want to get the plant and we want to get the jobs, but once we get the plant and the jobs, one of the locational decision factors is, is there reasonably priced housing for the workers and is there executive style housing for the owners as well? We need to supply both in the marketplace. Although we are the home builders association, we're just as concerned about that non-residential charge, because it's part of the whole environment of development.
Mr Sheehan: These numbers are outrageous.
Mr Sergio: Mr Dupuis, the minister said that elimination or reduction of development charges would reduce the average price of a home about $5,000, although he didn't provide any figures on that. Based on your knowledge and experience of the market -- you're shaking your head before I finish my question.
Mr Dupuis: I'm sorry; I'm taking it in.
1520
Mr Sergio: Is that a realistic assumption, that the average house price will come down by $5,000?
Mr Dupuis: The research we had done showed the top dollar savings being $3,400 in Brampton. There may have been some factors in the number the minister used this morning that I wasn't aware of, like the elimination of the 10% copayment on hard services.
Mr Sergio: If I were a prospective buyer, even first-time buyer, how could you demonstrate that to me, that I'm getting a $3,400 reduction?
Mr Dupuis: Today I'd have to say that you're at least a year away from getting it, probably 18 months the way this legislation is phrased. Today there's nothing we can do. In fact, that's one of the frustrations, that the previous bylaws technically expired last November. They are held pending decisions on this legislation.
Mr Sergio: Let's say the legislation would be in place and you're building a house and I'm coming into your sales office ready to sign. I want to say, "Where is my $5,0000, my $3,400?" How am I going to get it?
Mr Dupuis: The only thing I would say to that purchaser is, and we're forced do this all the time because of the GST: Go to the bottom line. Forget GST, forget levies, forget everything: Go to the bottom line, all in, and compare that price to anything on the resale market or builder to builder, and if you don't like the deal, don't make the offer.
Mr Sergio: So really there is no such thing. I mean, it's shopping and you get the best that's on the market.
Mr Dupuis: That's right.
Mr Sergio: Okay. I have one more question.
The Chair: Sorry.
Mr Dupuis, I do thank you on behalf of the members of the committee for taking the time to come this afternoon and present your views.
METRUS DEVELOPMENT INC
The Chair: The next association is Metrus Development, Mr Nelson.
Mr Fraser Nelson: Thank you for the opportunity to make a presentation to you today. My name is Fraser Nelson and I'm the general manager and vice-president of Metrus Development Inc. Metrus is a land development company that works primarily in the greater Toronto area but throughout Ontario, such areas as Windsor and Niagara Falls as well. We have been in business over 20 years, doing both land development and we have an industrial portfolio.
My experience with development charges ranges from the daily task of signing cheques so we can obtain building permits from many municipalities to being involved at the outset, from the previous government, with the April 1992 municipal affairs task force on development charges, and I helped assist with UDI and the representations with the greater Toronto area representatives.
Out of all this experience I find there are really four areas that I'm glad Bill 98 addresses. Those four areas are: to control the level of service; to address the attribution of cost between growth and non-growth; to ensure public accountability; and, touch wood, I hope it's going to be easy to implement, although the earlier speakers might suggest otherwise.
Very quickly, because I'm looking forward to questions as well, the level of service is controlled in the bill by removing those ineligible services and, probably most importantly, by applying the average-level-of-service test as opposed to the act, which says it would be the peak level of service. That has been the greatest area of concern with the present act.
Attribution of cost between growth and non-growth is addressed through the requirement of what's called the benefits test, as opposed to the previous formula, which used the trigger test. Bill 98 requires that any increase in the need for service must be reduced by the amount which benefits existing development, and it was further addressed by the requirement for the capital cost reduction or what is called the copayment.
Greater public accountability is accomplished through the requirement for the background study that addresses not only the capital costs but, most importantly, the operating costs for each service. It's interesting to sit at the table and have a treasurer of a municipality within the GTA look at the minister and say it took him five years to convince his council not to spend capital dollars because they had them because there was a downside to spending a capital dollar, and that downside was the operating cost and replacement cost. That's not coming from UDI; that's coming from staff at a municipality. I look forward to reviewing the regulations to ensure there is a linkage between the background study and the financial statement as it goes forward and the reporting statement at the end of each year.
I'll skip past the ease of implementation because that remains to be seen.
I want to give some positive background and examples today to let you know how some municipalities have dealt with this in a favourable fashion, but they are singular examples almost literally to the point of being unique. Certainly the municipalities were saying, "Trust us." I think we do need legislation to provide the control. I'll go back to my main theme here: We have to have the legislation to control the level of service.
Development charges have become the driving force behind land development and housing costs. Historically, the ranking of costs in land development were land, servicing and levies. This is no longer the case. You'll see attached at the back the UDI table that quantifies the government charges on an affordable $160,000 townhouse as 23%, or $36,000 of its final cost. Of this amount, approximately 50% is related to development charges.
I can tell you today that the ranking of cost of land development has reversed. Development charges are the number one cost now, usually followed by land and then servicing. In fact, we use a measure: If we're buying the land for more than the development charges are worth, we take a big step back and review our numbers.
Where do we come from? I won't dwell on this. The home builders have touched on that and there's a table that shows you pre- and post- comparison of charges.
I will dwell on and build on what Phil King said. The real measure of the impact of development charges is on the non-residential sector. Thank goodness Bill 98 exempts expansion of existing buildings. It really solidifies what most municipalities recognized they had to do and it will be, and continue to be, a major incentive to economic activity in the GTA. All economic development officers agree that enabling your home industries to expand is the best investment.
I make mention here of a study done by the Ministry of Economic Development and Trade benchmarking Ontario's automotive parts industry. Suffice to say that Ontario is competitive in all categories except industrial land cost. They cite one example: Lansing, Michigan, at $15,000 an acre for a serviced lot; in Ontario it's $270,000 per acre. Why is that? Because development charges constitute $100,000 an acre, that's why. We agree with all the numbers that have been bandied around today. Phil King is talking about $75,000 an acre. My example is in the region of York, where I deal daily. It's $100,000 an acre, and it's the cumulative effect of the education charge, the utility charge, the municipal charge and the regional charge.
You'll see a summary attached as well comparing 1995 charges in the region of York. Because of phasing, thank goodness, they've been moderated. But if those phases are allowed to mature as their present bylaw stipulates, their phasing-in times, they'll increase to $150,000 per acre. Thank goodness when we put those numbers forward to the regional politicians, they realized the problem and have rolled back and prevented the increases occurring.
The existing act simply does not control the level of service. I want to give a good example of how to control level of service. It was our experience with both school boards in the region of Peel in the Metrus Springdale residential subdivision. Phil King, I think, mentioned it. There had been previously no incentive to reduce the costs, and years of rules and regulations had made it almost impossible to break the mould of schools costing $120 a square foot. Through the cooperation of staff at the government level in both school boards, we're proud to say that now, today, two new elementary schools have been built in Springdale for a cost of $80 a square foot, fully furnished. I can literally tell you that as short as two and a half years ago they said it couldn't be done, but it's done and they're open for business today. I think that whole theme has to roll forward with Bill 98.
1530
I guess in a sense I disagree with some of the earlier comments that the idea of a copayment takes away from the incentive. I actually think the copayment provides a very valuable incentive for all parties to seek cost efficiencies. I'm not arguing on the hard side; it was never our position that hards should be copayment. Those are directly a benefit to growth and we should pay for them. But I take a big step back when it comes to the soft services.
UDI asked for three key changes. I won't dwell on them, but I'll only repeat that with hydro we're able to cite one example, which is Vaughan Hydro, that does not charge a hydro DC and they've survived quite well as one of the fastest-growing municipalities.
We can cite only recently where Markham Hydro recognized that there wasn't a direct correlation between growth and their charge for rolling stock and administration. They took those out of their charges and it dropped by 20%, and we thank them very much. But you all know how many utilities there are in this province and we certainly don't have the time and energy to go and approach all of them and make the same argument. But we appreciated their recognizing that they just couldn't justify the straight-line relationship. That's why we're saying hydro can be and should be an ineligible service.
With waste management, Mr King also mentioned that the non-residential sector pays to collect and dispose of its own solid waste, so why should they have to pay a charge? I suspect that as the municipalities work towards finding collective solutions to solid waste it's going to be extremely complicated to have one municipality set a charge and perhaps have to look at the other municipality that might have the solution for its solid waste. So that's a complication. It strikes me, though: What better area than solid waste for reducing/recycling than to have it as a user fee?
Finally, transit. Transit is being requested to be funded equally. That's what UDI says. Right now it's being put in for on the hard side with the minister's announcement. I am concerned that whatever gains and economic incentives we have from a reduction through other areas in Bill 98 will be lost to transit. That is the area in the future that is the absolute biggest unknown. Presently I would say the only control on transit is the operating costs, from what I can see from the experience we've had with it.
I wish to conclude that Bill 98 provides the right balance to have all parties seek cost-efficient delivery of services. In my mind it's never been a question of growth paying for growth. Rather, growth should pay its fair and reasonable share, and Bill 98 accomplishes this. Thank you.
The Chair: Thank you very much. We have about three minutes per caucus.
Mr Clement: Thank you. I'm hoping you can help me wrap my mind around an issue that has arisen this afternoon by virtue of some of the statistics that you are providing on this page here that illustrates the development charges in selected municipalities. You compare development charges in various municipalities, including my own, in 1985, 1989, 1993 and 1995. For instance, Brampton went from $8,816 in 1989 to $13,500, in that six-year period.
I'm comparing that to Mr Watson, who came by earlier this afternoon, who claims that the median increase per unit on average is $4,300, I believe from 1989 to 1997. He said, "Look, it's not a big problem because it's only gone up $4,300 on average or on a median from 1989 to 1997, so you're trying to defeat a problem that doesn't exist." Well, I'm looking at your numbers. Maybe there are one or two in here that go up $4,300 or less, but most of them go up $6,000, $8,000, $9,000 from 1989 to 1995, let alone 1997. Can you shed some light on whose statistics are more accurate?
Mr Sergio: His, of course.
Mr Clement: Well, I just want it on the record.
Mr Nelson: I know you want it on the record. This is from the Ontario Home Builders' Association. Let me first quantify that; they did the research. It has been my experience that there had been quantum leaps in charges post-Bill 20, the present Development Charges Act. That has been our experience throughout the GTA, where the development charges have gone up and up and up not only because of the inflation index that has been applied to them but also because of, again, this peak level of service which has allowed the charge to skyrocket.
Mr Hardeman: Just very quickly, thank you very much for your presentation. In your numbers you talked about the cost of an acre of land in Lansing at $15,000 and the development charge is $100,000, but that still leaves $170,000 for an acre of land here as opposed to Lansing. What contributes to that $170,000 as opposed to $15,000?
Mr Nelson: I wish I knew how they did it there. Certainly the servicing costs for industrial land here are around $80,000 an acre. That leaves you then $70,000 an acre for all of your other costs required to deliver that, including land, which is the main component here. As I mentioned, our three categories are servicing, land and development charges, so we can quickly identify at least $180,000 of the $270,000.
Mr Sergio: Mr Nelson, thank you for coming down to make a presentation to our committee. The affordability of homes and land and stuff like that depends also on the market -- I'm playing the devil's advocate here -- at any time. The price of land and homes goes with the times, goes up and down.
Mr Nelson: Yes.
Mr Sergio: Right. I know, for example, some developers, perhaps even yourself, in the last few years paid $1 million for one acre of residential land with high densities. Today that same lot perhaps may be worth a couple of hundred thousand dollars. The services would be the same, right, to service that particular piece of land?
Mr Nelson: Yes.
Mr Sergio: Is it then possible that maybe the role here is the culprit? You have your own role to make money as a private developer. Local municipalities have a very different role. They've got to provide service, at a cost. Can you fault the local municipalities, let's say, especially in bad times, for providing those needed services to its residents and therefore they have to charge whatever they may have to charge?
Mr Nelson: No, they shouldn't be charging whatever they have to charge. My answer is this: My whole premise is level of service --
Mr Sergio: I hope to follow up with another question, that's why I'm asking this question.
Mr Nelson: I understand. Level of service has gotten out of sight, absolutely out of sight, and the cost reflects that. That's all it is. Now, if the municipality goes in and says they have to have it, we're saying we'd like the average test because why should the new homeowner -- and especially where you're leading to, on what we call the soft services, which are not delivered when they move in. They're there, quite often, for several years before the rec facility is built or any other soft facility is provided for them. They're a taxpayer as well.
We do it as a sharing. The test should be when they move in they've contributed towards a portion of the capital cost. Then they become a taxpayer and through their taxes they contribute towards the balance of the requirement for delivering that service. We really need a test because fundamentally the municipalities have a problem. When the ratepayer shows up and asks for this service and they've got a pot of capital dollars there, they're hard-pressed to refuse the spending of it. I didn't come today to cite abuses, but if you ask me, I can fill an hour of abuses where municipalities cannot resist the spending of the capital dollars. I'll cite the treasurer of a municipality who simply said it took him five years of concerted effort to control his council. That's the reality of it.
Mr Sergio: What happens, for example, when you're a developer and you have a piece of land that you apply for a building permit or rezoning on and say, "I want five times coverage because I've got to get paid because I paid $1 million for this piece of land"? The local municipality says, "Okay, we'll give you that rezoning but you've got to provide certain things." Right? You're caught in the situation where you say either you pay --
The Chair: Briefly.
Mr Sergio: -- or you won't get the rezoning, let's say, or that particular high density so you can make more units and make more money.
Mr Nelson: Well, quite the opposite. Quick example: We bought 1,000 acres in four projects in 1996. We bought them from the bank because the previous developer went bankrupt because of the economy, and development charge is part of that. In one of those projects, which is the former city of Toronto lands known as the jail farm, we did the opposite: We dropped the density. We couldn't afford the development charge price on it so we went down to a lower density. The municipality was happy and today you can go and buy townhouses on Yonge Street for an affordable price.
Mr Sergio: So are you saying then it's --
The Chair: Excuse me, I'm sorry. Ms Churley.
1540
Ms Churley: Thank you very much. I'd like your opinion. I think you've given it to some extent, but perhaps a fuller opinion as to why there's such a difference between the mayors and councillors and the developers, why well-respected mayors like Hazel McCallion and others have real concerns. They disagree and are insulted, for instance, when the Urban Development Institute, in particular, makes suggestions that they're not managing well, that they're not doing better than other levels of government. They're feeling very insulted by certain statements from the development industry, frankly.
I'm wondering why there's such a problem here. You seem to be suggesting that there's no control at the municipal level, they're wasting money and the only way that it can be gotten under control is to rein them in under this legislation, and you can provide the same services for a whole lot less money if they're reined in. Is that what you're saying?
Mr Nelson: No, I'd put it differently. First of all, Mississauga is an extremely well run municipality. I wish all the other municipalities had as much in reserve funds as Mississauga. My comment is that the present act allows a study to be done to charge an astronomical amount of money for any number of services and in particular the soft services. The ratepayers are demanding those services from the politicians. They tell us that daily. It's the kid in a candy store situation. If you have the capital dollars you'll spend it. Should you spend it? Should you look at your operating costs? Should you really see whether you need that level of service? Bill 98 brings those questions to the forefront. They were buried before. I'm not saying they're fiscally irresponsible at all. The present act allows them to charge in a fiscally irresponsible way.
Ms Churley: So you would still accept that in order for a community to be viable and in order for, say, a new development -- when people are out shopping they're not just looking for the infrastructure. I mean, I have kids; I want services for those kids. I have elderly parents; I want health care for those parents etc. I like libraries myself. There are certain things that I think generally people look for when they're looking for a house. They're also looking for a good community to live in. It's not just infrastructure people are buying. Doesn't it help sell?
Mr Nelson: Okay, let me answer your multiple questions. It doesn't help sell. I live in Richmond Hill. It's a beautiful town. It has a library. It's an overbuilt library, and the politicians would agree to it, so much so it should be a regional facility. Do I regret that? So be it; it happened.
I look out onto a 20-acre park which has a community centre on it. Our firm built that. The town says they built it, but we paid for it, pre-development charges. They put a pool to it, attached it three years later, which was great. I watched them add 100 parking spots to it at a cost of $300,000. I went as a homeowner and said: "Why are you putting those parking spots in? The parking lot for the existing facility has never been full, ever." I watch out my back window now. Every weekend they plow it and the lights are on 365 days a year, and it's never, ever full.
Yes, those facilities are needed and they're part of the community. They are normally delivered after the bulk of the community's been built. We're not arguing that we shouldn't pay a portion of it. The key is "a portion of it," because they're not there day one. That's the main point distinguishing between hard services and soft services. Sewer and water are needed day one, no argument, but the recreational facilities are needed down the road.
To Richmond Hill's credit, they cash-flowed a lot of things to keep their charge down. Thank goodness they did, but unfortunately they have $2,000 a pop for park purchase. That's the one area I criticize in my town. They're paying from the left pocket to the right pocket $400,000 an acre for parkland. It's nuts. They can go two miles north of town and buy -- I won't look at Mr Cherniak. They can buy a lot of land just north of town, 10-fold --
Interjection.
Mr Nelson: Yes. No. Anyhow, Bill 98 provides the necessary controls; it doesn't preclude the municipality from doing.
The Chair: We must end it there; I'm sorry to interrupt. Thank you very much for taking the time to come this afternoon. We appreciated hearing your advice.
We now come to the Hamilton Home Builders' Association with Mr Campbell, I believe.
Mr Peter Goldthorpe: Madam Chairman, if I could beg your indulgence, my name is Peter Goldthorpe from the Ontario Home Builders' Association. I'm expecting my members from Hamilton. They were scheduled for 3:50; they have not arrived yet. I can do the presentation at your wish or if the next speaker is here --
The Chair: Shall we go ahead with the next speaker. All right. From Stamm Economic Research, then? No, not here either? Okay. Why don't we take a recess for 10 minutes. We'll be back here at five to 4. Thank you for that.
The committee recessed from 1546 to 1559.
HAMILTON HOME BUILDERS' ASSOCIATION
The Chair: If we could come to order, please, our next presenters are from the Hamilton Home Builders' Association. Welcome, gentlemen. You may begin.
Mr Adi Irani: Good afternoon. My name is Adi Irani. With me is Ward Campbell. I'm a consulting engineer from Hamilton and Ward is a builder. We work in the residential construction industry in the regions of Halton and Hamilton-Wentworth and we represent these regions in the land development committee of the Ontario Home Builders' Association.
On behalf of the builders of the Halton and Hamilton-Wentworth regions I would like to thank this committee for holding this meeting in our area. We really appreciate the extra effort, on your part, of travelling around the province to hear the views of people who are directly affected by development charges. I'd like to take a couple of minutes first off to give you a general context of the policy debate that has driven Bill 98 and then I'll turn the thing over to Ward to talk about some of the specifics in the bill.
To set the stage, let me briefly describe what has happened to development charges over the last 10 years. If you turn to the back of my remarks you'll see data for four different years for our regions. The 1985 data are for lot levies that were being collected under the Planning Act and the 1989 data are also for lot levies under the Planning Act. We have 1992 data which show development charges under the Development Charges Act and 1995 data that show the same charges as you progressed through a recession.
As you can see, levies in Halton were already substantial in 1985. They were at least double those in Hamilton-Wentworth, and by 1989 they were three times as high. This sort of inconsistency is one of the main reasons why we wanted a legislative framework for lot levies. Unfortunately we got a bit more than we bargained for when the legislation went into effect. For some municipalities it is almost as if the legislation sanctioned greater use of development charges.
As you can see, charges tripled and doubled in the Hamilton-Wentworth region and they nearly doubled in Halton. While these charges were increasing, housing starts were falling by 25% and 30% in our areas. The last column of data show further inconsistencies and highlight a major concern with the current legislation.
As you know, the housing industry has been badly depressed through the 1990s, so depressed, in fact, that independent housing consultants estimate over 100,000 families have not acquired the housing they need during this period. After the overbuilding that happened in the 1980s, it took a couple of years to absorb the excess units that were built, but by 1992 the market had reached its equilibrium.
Since that time, production has lagged behind real need as defined by population growth. These 100,000 units that should have been built represent housing for families that have been forced to live in overcrowded conditions, but they also represent something else. They represent nearly 300,000 person-years of employment that has been missed.
With the country slipping into recession and housing markets profoundly depressed, what did the municipalities do? First they doubled, then tripled development charges, and then in most cases they kept these charges high. They did this even after it was clear to everyone that the market was in a deep and prolonged depression. Some municipalities, it is true, were more responsible. In Hamilton-Wentworth the charges came down. The 1995 data include the newly passed education development charges, so the decline is even more for municipal charges than what shows up on the chart.
But many more municipalities maintained the charges or even allowed them to increase. Obviously there are lots of reasons why people have not been buying homes in the 1990s. But when you consider $15,000 to $20,000 development charges on $160,000 homes, and that is to cite the minister's example, that is a big reason for a lot of buyers not to buy. These charges also help to undermine the economic viability of rental projects and they keep the private sector out of that part of the market.
It is clear to us and it is clear to the government that high taxes on housing are a barrier to affordability and to job creation. It also seems clear that many municipalities cannot be relied on to exercise due restraint in the absence of provincial legislation. For both these reasons, we have recommended key changes to the Development Charges Act. I'll pass it over to Ward now to discuss.
Mr Ward Campbell: When the government first asked us what sorts of changes we thought were necessary to this act, we had a simple list:
(1) restrict the scope of eligible services;
(2) define "growth-related" in terms of benefits;
(3) limit the level of service that can be financed through development charges to a historic 10-year average within a municipality; and
(4) improve the accountability so that homeowners have some assurance that they will eventually get what they have paid for.
All four of these have been discussed in detail in the Ontario Home Builders' Association written response to Bill 198, which I'm sure you have.
Today I'd like to confine my remarks to the last two points. Regarding level of service, with some qualifications, the industry generally agrees that development charges are a reasonable way to finance the level of service in new areas that is the norm in the rest of the community. The operative term here is "norm."
To give this a little more precision, we have proposed defining an eligible level of service as the historic 10-year average. One of the reasons why we see high charges in some municipalities is that they take a peak level of service and they use that as their baseline to develop the development charges for the new areas.
Municipalities will tell you that this gold-plating is what homeowners want, but I'd like to suggest another reason for choosing the peak level as a standard. Higher standards mean higher property values. This means a richer assessment base, and it also means more affluent residents, which means fewer social services. Thus municipal politicians get the best of a number of worlds. Development charges finance showcase developments at no expense to municipalities. At the same time, this tax inflates the assessment base and keeps a check on the future demand for community services.
For some services, using a 10-year average will be a little more complicated in actual practice. But these complications are just technical in nature and they can be overcome and worked out. The alternative of using a peak level of service creates other problems: problems for young families that cannot afford homes and problems for investors who cannot get economic rents to coincide with market rents to make investment in rental accommodation. These problems are a lot more difficult to overcome than the others.
Now I'd like to turn to accountability. Let me begin by briefly describing the process to you. The use of development charges extends over a number of stages. The process begins with background studies that forecast service requirements and justify a total growth-related cost. The bylaw basically translates this cost into a per unit charge. Once the municipality begins collecting the charges it must keep the money in reserve funds and eventually must spend it.
Our objective is to ensure that the homeowners get what they paid for. This means ensuring that the projects described in the background studies get built. We believe the way to ensure this is to make every step of the process visible to the taxpayer. Bill 98 contains some very substantial improvements in this regard. But in other respects it actually weakens some of the accounting provisions that were introduced last year in Bill 20.
1610
We agree that the legislation should prescribe the content of the background study and how the calculations are made. We also agree that municipalities should be required to make this study available prior to the public meeting for the bylaw. We'd like to add a requirement that the service requirements identified in the study be included in the bylaw. In other words, a bylaw or a schedule attached to the bylaw should describe what is going to be built. We also believe that separate reserve funds should be required for each category of service.
As well, the annual reports should report spending on a service-specific basis. In this way, a person living in a new area could look at the bylaw and the annual reports and easily determine if the moneys are being spent as originally envisioned and what they paid for.
That concludes our remarks today. To sum it up, we discussed the impact development charges had on the housing market during the 1990s. Turning to specifics, we argued that the eligible level of service should be determined by a historic 10-year average, and we explained why the provisions for accountability need to be further strengthened. We thank you for your attention today and we'll be happy to answer any questions you may have.
Mr Sergio: Thank you for coming down to make a presentation to our committee today. The minister also said this morning that if development charges were to be reduced, this would spur the construction of new affordable housing or units, whatever. Do you think development charges alone would do that? Would your builders, developers or even yourselves go out and build strictly based on the elimination or reduction of development charges, or are there are a number of other things associated that should help you and would want you to go on the market and build rentals?
Mr Campbell: Are you referring to rental accommodation?
Mr Sergio: Affordable, yes.
Mr Campbell: Would the removal or lowering of development charges start us building? No, not on its own. Will it help? Definitely. Every time you reduce the cost of housing you bring more people into the market and you make it better for everybody. There's no question that the reduced charges will be passed on to the consumer. There's no question that the market is very intense right now. I know I have huge competition. I lost a deal today for $1,000. If I could have taken $1,000 out of it, I would have. There's no question it will get passed on to the consumer.
Mr Sergio: It doesn't seem a shortage of houses, some 400 builders or sites are out there, but there is nothing for so-called affordable housing, and there is a big need out there. What else would you like to see that would also get you to build not only single houses or town houses but also affordable rental units?
Mr Irani: If I can answer that, one of the costs of housing is the process we have to go through to get approvals for development. In that sense we have always said that if you streamline the process, if you make it more efficient, that will reduce the cost to the developer to bring the product on the market. That will help in reducing the prices of houses, make them more affordable. That will go a long way as well. There are other things, the cost of land; the whole marketplace is not just on one aspect of this, but every little bit helps. If development charges are reduced, that will help in making them more affordable.
Mr Campbell: Specifically with rental housing, it is very important that two other things get done to spur the rental construction. One is that the municipalities equalize their assessment rates for houses. I have rental properties in Hamilton where I pay three times the tax that a person in an identical condo unit pays. It's not fair, it's not proper; it basically raises the cost of rents and makes them harder to do. The other is the GST. On a new rental accommodation I've got to pay a full 7% GST, whereas I don't on an owner-built.
Ms Churley: Thank you for your presentation. What would you say, in your experience, is essential for a viable community so that it'll be attractive to prospective buyers? You mentioned some of the gold-plating. Perhaps you could tell me what you as developers, in your experience, have seen that people, when they're looking for a new home, perhaps in a new community, want to know is going to be there in that community down the road to service them besides the necessary hard services.
Mr Campbell: There's no question that somebody moving into a community is looking for the amenities that are in the community. If I'm out looking to buy a new home I'm going to look at a community, I'm going to drive around, I'm going to see what's there and expect to have the same sort of thing in my community as what's there. I'm going to look at the entire town and see what's around.
Ms Churley: When you talk about, on the last page, that you'd like to see some amendments so that it's even -- I'm trying to understand this. You say that "in other respects, that actually weakens some of the accounting provisions." Can you be a little bit more specific in what you'd like to see outlined and what kind of amendment you'd like to see?
Mr Campbell: Yes. We would like to see schedules attached to the bylaws that show exactly what was in the study, what was included in the development charge, what calculated that cost per unit. We'd also like to see the municipalities keep separate accounts for each one of those services -- no problem to borrow between accounts and that sort of thing, but keep the accounting for each one there so that we know that they're actually building the things they said they'd build. If we see that, I think the consumer can follow that through and watch it.
Ms Churley: Would you have concerns in fiscal difficulties if you are limited, under legislation, to paying only for hard services and a municipality was unable to guarantee that later on down the road some of these other services, what we call soft services that are so vital to a community, could not be built? Would that create concerns for you in terms of being able to sell?
Mr Campbell: No, it would not.
Ms Churley: Why?
Mr Campbell: Because that's a consumer's choice. If they want that service they've obviously -- if it's not in the development charge, they've obviously received a lower-priced house to buy that. Then they have the choice of whether they want to pay to have that service put in their community.
Ms Churley: So as long as they know up front.
Mr Campbell: As long as they know about what's included in it, I don't think that's a problem.
Mr O'Toole: Thank you for your presentation. Just quickly, on page 3 there were a couple of points you made. I just want to verify that I heard you correctly. In your example you used a comparison between Halton and Hamilton, and on first inspection here it's clear that Halton has a very much enriched, it could be said gold-plated, development charge.
On that, you said: "...gold-plating is what homeowners want. But I would like to suggest another reason for choosing this peak as the standard. Higher standards mean higher property values. This means a richer assessment base."
Do you think this is kind of a deliberate part of the strategy of planning, that it has no relationship with the real cost of service? This almost sounds like something I'd be concerned about.
Mr Irani: I think that some of the municipalities want higher standards for their communities which are not the norm all across Ontario. They would like to see what we call gold-plated services. They don't have that level of service for the existing community, yet they want to enhance it for any new developments in new communities.
Mr O'Toole: Upscale development; is that it?
Mr Irani: It's an upscale development. There's nothing wrong with that. We don't oppose that in principle. We are just saying that is not something that should be imposed upon a new home buyer in its entirety. The new home buyer should, under development charges, come under a level of service which is existing or which is at the average for the last 10 years. Anything above that should be something the community as a whole wants. There's nothing wrong in upgrading that community to a higher level, but they should be prepared to pay for it.
Mr Hardeman: To Mr Campbell, at the start of your presentation you outlined four things that the new act should encompass: Restrict the scope of eligible services; define "growth-related" in terms of benefits; limit the level of service that can be financed to a 10-year average and improve the accountability so homeowners know they get what they pay for. In your opinion, does Bill 98 do those four things?
Mr Campbell: It moves a long way towards that. I say we would like to see the tightening up of the accountability provisions within the act. We don't think they're tight enough to really give the meat we'd like to see in it. Make the municipalities accountable for what they're doing and what they say they're going to do. So we'd like to see strengthening in that regard.
Mr Hardeman: Do you envision that the 30% payment on some of the services is a good method of accountability for municipalities?
Mr Irani: I think that goes a long way in making them accountable, especially when it comes down to providing the types of services they ask for.
You asked the question -- I was going to answer the first question -- whether we are satisfied with Bill 98, how it goes with respect to accountability. I think we have made a couple of suggestions in the OHBA paper: that you set up separate accounts, and don't lump them together as only one account, for 90% services and another for 70% services. We would like to see separate accounts in that fashion. Also -- I have forgotten what I was going to say, but that's fine. It'll come back.
1620
Mr Sheehan: The development charges are paid in sequence. Apparently with draft plan approval there's a percentage paid, and then when you get your building permit the balance is paid.
Mr Irani: It varies from municipality to municipality. Most municipalities will have it at the building permit stage. The region of Halton will take their hard services when you sign the subdivision agreement and the balance of it at the building permit stage.
Mr Sheehan: One of the charts given by Mr Nelson doesn't show any carrying costs for the money you put up on these development charges. Is that a significant item? Is the interest on the money you've paid out a significant item?
Mr Campbell: Sure.
Mr Sheehan: Why don't they include it in this chart?
Mr Irani: I'm not quite familiar with the chart.
Mr Sheehan: Do you have any idea what it would be, roughly?
Mr Campbell: It depends on the situation. If it's one where you actually pay it up front, no matter how you look at it, it still costs 6% to 8%, so you just compound it in.
Mr Sheehan: Would it increase the development charge by 5%, 10% or 15%?
Mr Campbell: Overall, most projects? Yes.
Mr Sheehan: On an average basis?
Mr Campbell: On an average basis.
Mr Sheehan: So it's not even in here, but it is another factor that's to be considered?
Mr Campbell: Sure, it is.
Mr Sheehan: In other words, the homeowner's paying for those things, not you guys?
Mr Campbell: Yes, they do.
The Chair: Mr Irani and Mr Campbell, thank you very much for taking the time to come this afternoon and for sharing your perspective on this act with us.
OAKVILLE CHAMBER OF COMMERCE
The Chair: Our next presenters are running a little bit late, so with your indulgence we'll move to the Oakville Chamber of Commerce, please. Mr Paara and Mr Crossley, welcome.
Mr Andres Paara: My name is Andres Paara. I am the president of the Oakville Chamber of Commerce. Don Crossley is our executive director. Joe McAuley is one of the directors from our board. We probably won't take your whole time frame. We have a rather brief presentation. We are happy to be here and appreciate your time.
The Oakville Chamber of Commerce represents over 1,700 members of the business community within Oakville. Through its business and government affairs committee we have been studying the impact that development charges seem to have had on the ongoing growth of our community and the creation of new jobs. We noted with great interest the province's proposed legislation, and the following are seven points our board of directors submits for your consideration.
(1) The Oakville Chamber of Commerce is pleasantly surprised that many of the negative aspects of the previous development charges legislation have been dealt with in the new bill.
(2) The chamber agrees in principle with the objectives of the bill, which include promoting job creation and providing for increased municipal accountability while providing for the recovery of development costs related to new growth.
(3) The chamber wishes to emphasize that the new bill already represents a compromise between competing business and government interests on the cost-sharing formulas dictating what the development industry and municipalities must pay for growth. For example, the industry's view on discretionary or soft services was to share costs 50-50 with the municipality, while the bill suggests the costs be shared on a 70-30 basis in favour of the municipality.
(4) The chamber is particularly encouraged by the exemptions proposed in the bill for small industrial expansions, with expansions up to 50% of floor area being proposed to be fully exempt. We believe this will help to promote business activity and retain jobs within Ontario for small to medium businesses, which we feel are the backbone of the economy.
(5) Our chamber is very encouraged by the efforts of the province to provide uniform standards and methodologies and the tightening of the rules for determining average service levels as proposed in the bill, which we feel will enhance accountability to the public.
(6) The Oakville Chamber of Commerce recommends that a mechanism be established such that any reductions be passed directly to end users, be they home buyers or business occupants. By making the fee visible, accountability for the dollars is encouraged and it would be ensured that end users benefit from the savings.
(7) The Oakville Chamber of Commerce plans to make further recommendations directly to the municipalities that the planned reforms to local bylaws be implemented earlier than the 18-month time frame allowed by the bill to encourage local economic activity sooner. Thank you.
The Chair: Very brief. Lots of time for questions. In fact, and I just have to do some quick math here, we have just a little over five minutes per caucus. We'll begin with the NDP caucus.
Ms Churley: I don't know if I'll use up the full five minutes. Thank you for your presentation. Your mayor, the mayor of Oakville, was in this morning -- and I'm sure you're well aware that she does not support this legislation -- and spoke very vehemently against it. I wonder if you're aware of her concerns and if you agree with any of them.
Mr Paara: We are aware of her concerns. This is a situation where the chamber feels we may just agree to disagree with Her Worship on this issue.
Ms Churley: I tend to listen closely to everybody, of course, but in cases like this to municipal leaders who have a lot of experience in the area. She expressed really grave concern that, contrary to the belief that this will end up necessarily creating jobs and growth, in terms of some downloading that's about to happen, and nobody is sure yet what that will finally entail, and the 40% lost already from the municipal transfers from the province, the kinds of communities that people look for, when they're looking for a new home -- sometimes people refer to it as gold-plating and others would say that a library isn't even necessary in a community; developers have different views. It's a planning exercise, and particularly in new communities people like to know what, beyond hard services and infrastructure, is going to be in their community.
There's real concern that the affordability of some of these things won't be there and the planning exercise that's so important is no longer going to be possible. I just wonder if you have any views on that at all.
Mr Paara: Joe, would you like to take that one? I'm happy to take it if you don't, but --
Mr Joe McAuley: Our belief at the chamber is that part of the strength of the community is having a strong business community to support the residential community as well. We have a number of examples that we could cite, which we don't have with us, though, where we know for a fact that we have lost some businesses coming into Oakville because of the high development charges. If industry and business and commercial do not move into our community, I believe that then the residential will not follow as well, nor is it a healthy community necessarily then either.
Ms Churley: One final question. Mostly we have heard from developers today, but we have heard from a couple of mayors and, interestingly enough, form some health and hospital advocates -- we have one more coming today -- expressing real concern about the need for hospitals to be partially covered by development charges. Hospital and health care, in their view, is as important as fire. Health care is so fundamental, and that's excluded. Do you have any comments on that? Because those are some of the areas we'll be looking at, I suppose, in terms of amendments.
Mr McAuley: That's getting into more detail than what we really propose here. I think that's beyond what we're proposing. I don't think we've studied to that degree that you're suggesting on where we should go with this. There are ongoing discussions that are going to come of this and therefore many of these details will come out.
Ms Churley: Sure. I'm asking because we will be suggesting amendments and that's fine if you don't have an opinion at this point. I think it is one concern you'll be hearing from this community where we might want to all think about making an amendment.
Mr McAuley: That's true enough. As we've said here, there is a compromise in here to start with, so we feel it's been addressed to some degree, but there must be ongoing discussion.
1630
Mr Galt: Thanks for the presentation. Anything that can be put on two sheets of paper makes it very, very worthwhile.
Ms Churley: Now keep your questions short.
Mr Galt: We'll do that.
I'm interested in your item 6, making the fee visible, accountable etc. I'd like you to expand on it, but just a couple of thoughts I have and then I'd like to hear from you. One relates to how we've heard great concern over, "Will this be passed on?" Then I'm starting to wonder, should it be an add-on, like a value added to the price of the house so that the new owner has to pay it direct and then we'll know for sure that they do get the reduction?
Secondly, we've heard a bit about hospitals and concerns that maybe hospitals should be getting some of these development charges as well. I'm sitting here thinking I'd prefer myself to donate directly and then I'd get a tax receipt. That would make it a little more accountable, as far as I'm concerned, than having it added on to the price of my house. A couple of thoughts that I had along this line, and I'm wondering what you were thinking as well in making the fee more visible.
Mr McAuley: We were trying to keep things out in front of people and therefore decisions are made based on that as opposed to lumping it in. Hidden costs are never good from a business point of view. The buyer, granted, might have a difficult time because the price is here and they think it should be here, because those prices are rolled in, and that's difficult for them. But I guess from a business perspective we'd rather have things out front and open where people can make decisions on, government can make decisions on percentages etc, and therefore the hidden cost goes away; people are up front.
Mr Galt: Just to pry a little further, methodologies: Would you have an itemized list of the cost of the new house or would you just simply add it on to the price after they've negotiated a price, add on the development charges? I'm curious on your thoughts.
Mr McAuley: The philosophy of hidden costs just doesn't sit right with us because then they can be manoeuvred. Once they're out in front -- I agree with your tongue-in-cheek comments about having a list here. It's obviously ridiculous, but nevertheless, it's just a philosophical view that having them out front is a much more acceptable method, to see costs in front of us. I'm not sure that's answering it the way you'd like it answered, but the fewest hidden costs, the better for everybody.
Mr Galt: Yes, absolutely.
Mr Hardeman: Thank you for the presentation. Going to number 3 of your list as it relates to the copayment of 30-70, obviously it's been put in there to build in, I guess one would phrase it as accountability, for municipalities. If they have a vested interest financially in it they will build to an acceptable standard that will help the community. The municipalities have been telling us that's inappropriate because it's unfair to put the 30% cost on the existing taxpayers. You, representing the chamber of commerce, are the existing taxpayers and you're coming forward with a recommendation. Your choice would be that it should be 50-50. Do your members not have a concern that 50% would be placed on their taxes?
Mr McAuley: We're always concerned. That's the problem with development charges: You either get it up front or you get it -- it's a gentle balance. Whether 30% is right on is hard to say, but when it's a compromise from 50-50 up to 70-30, we felt that was a good move in the right direction.
Mr Hardeman: As existing taxpayers, you believe that there should be a copayment there, to hold municipalities accountable for a level of service?
Mr McAuley: Our thought is that the existing taxpayer is going to get some benefit out of this new library or this addition at the hospital or something of that nature. They're going to derive some benefits out of this, so the existing taxpayer should pay a portion of that rather than the new person paying 100% of it.
Mr Young: Several years ago, Ford Motor Co invested a tremendous amount of money to expand its paint plant here in Oakville. As I understand it, one shift of one vehicle is worth about 1,000 jobs. We came very close to losing that expansion because, as I understand it, the development charges were $8 million. What would 1,000 jobs mean to your members' businesses in this town?
Mr Paara: Without Ford in our town right now, I'd hate to see what our economic picture would be. There's an economic study going on right now within Oakville to see what economic development will be and what the forecast should be for Oakville, but it has been very clearly laid out already that if Ford wasn't involved in our economic picture right now in Oakville, we wouldn't be in a very good position.
Mr Sergio: Mayor McCallion this morning said that you can't legislate -- or you should legislate the price of homes. Do you think government should legislate the price of homes?
Mr Paara: I don't really know if we can sit here and speak to the residential aspect.
Mr Sergio: I don't think so, right?
Mr Paara: I think I can fairly comfortably speak on behalf of my members and say --
Ms Churley: You shouldn't quote Hazel out of context.
Mr Sergio: Going back to your number 6 -- I like number 6, actually -- how can we get down to business on this one here? Do you have any idea how I, as a new home buyer -- let's say I'm going to get that $5,000 reduction there -- any idea how this could be implemented?
Mr Paara: We have had a brief time with our committee to review the bill. This is a recommendation without any specifics involved with it right now. Would that be fair, Joe?
Mr McAuley: Yes, I think that's fair.
Mr Sergio: That's something that you would like to see incorporated in the legislation?
Mr Paara: More specifics?
Mr Sergio: Yes.
Mr Paara: I think specifics are good.
Mr Sergio: Going back to your number 2, with respect to municipal accountability, we have heard some mayors here today say, and we have heard it on other occasions as well, that municipalities are run better than federal or provincial governments. What is wrong, then, if everybody says that municipalities are running the best level of government? Is it a problem with accountability or some item, let's say, that maybe some time in some municipality gets out of hand a little a bit? Could it be that just because some municipalities are charging maybe a little bit higher than normal or whatever makes the whole municipal government unfit? What's wrong with the accountability here?
Mr Paara: I don't know if you can make such a general statement as to say it makes the whole municipality unfit. What we're after is more of an even playing field, though, to work with.
Mr Sergio: Shall we be looking strictly to negotiate the development charges with a particular local municipality, instead of having blanket legislation forcing every municipality to comply? We're looking for direction.
Mr Paara: I think with the strength of the economy for Ontario being attracting business from outside, it would make sense to legislate it, yes, rather than having municipalities do it individually.
Mr Sergio: You don't think that the local municipalities, given the particular time, using their flexibility, could adjust those rates of development charges up or down to suit a particular need at a particular time? We don't hear anybody complaining now; everybody is selling homes, I believe.
Mr McAuley: I believe the municipalities will have input into rates, but the level playing field that Andres has made comment to, at least consistently across the province on what percentages etc are charged, that would be level across and therefore every community would be the same from that perspective. Each community is going to have to wrestle with the actual dollars per square foot, and therein there may well be a difference.
Mr Sergio: A few years ago, I'm aware of one particular municipality that said: "No charges whatsoever. Just come and build." They didn't. Why? No development charges whatsoever. Why?
Mr McAuley: It's either pay me now or pay me later. If you don't have a development charge to pay the upfront, then it's got to come out of the taxes. It can only come from two places.
1640
Mr Sergio: There was a particular time when the market was just not pulling for developers. The market had slowed down, there were no buyers. So wouldn't that be an attraction for a developer to say, "This is the time to go and do it; no development charges."
Mr Paara: It very well may be an attraction, but I don't think our members would believe that's the way to go either. As Joe said, you can pay me now or you can pay me later somewhere along the line, so it's finding the most attractive way to do it so everybody ends up getting similar services.
Mr Sergio: So in this case the bottom line is the home buyer will have to pay. That's the way we see it, because there doesn't seem to be any mechanism in place, and that's why I would like to see a mechanism in place, where homeowners can look at that $3,000, $4,000, $5,000 reduction, rebate, whatever. That would be an attraction for a homeowner, wouldn't it? Could you suggest a mechanism to do that?
Mr McAuley: I still think you've got to come back to the philosophical basis of development charges that you pay for what is new. If you're adding on to the system, then theoretically you should be paying for that new system.
Mr Sergio: What I hear really is that the bill as it is maybe needs some further changes, amendments.
Mr McAuley: Obviously it needs some adjustments here and there, as we've said. This is a very general statement.
Mr Sergio: Would you like to see the proposed amendments before the bill is brought in and approved by the government?
Mr McAuley: I'm not sure that's workable, but we've gone along with the compromise on some of these numbers and feel they're probably in the ballpark. Whether it's practical to come back to the community and get input again -- if that's practical, that's fine. We'd certainly like to have more input as we go along.
Mr Sergio: To be the devil's advocate, 30% or 50% makes a municipality less accountable or more accountable?
Mr McAuley: I think you're taking words out of context, aren't you, sir?
The Chair: I'm going to have to interrupt at this moment.
Mr Sergio: I can see the knife is coming. Thank you very much.
The Chair: Gentlemen, thank you very much for taking the time to come before us today. I would also like to indicate that we've had a very hospitable reception here in Oakville and we appreciate that as well.
Mr Paara: You'll always get that here, Madam Chair.
STAMM ECONOMIC RESEARCH
The Chair: Our next presenter comes from Stamm Economic Research. Mr Garry Stamm, please. Welcome.
Mr Garry Stamm: I want to apologize for arriving a little late this afternoon. The Gardiner was more plugged than usual. I've also brought out a stack of reports that I'm going to refer to only once, briefly. First, I'd like to establish my bona fides a little bit with this matter.
I'm in the field of urban and regional economics. My association with development charges is about 25 OMB cases. My most recent clients on this subject were the Ford Motor Co here in the town of Oakville and the Chrysler motor company, currently having a bit of a fight with Brampton about development charges there.
What I've done is present you with a brief I hope you have. I've put everything into a three-page summary with respect to Bill 98 and I've attached to the end some drawings. These are cartoon drawings. I don't want people to get too excited about them at the moment, but they're in there for a reason, because I'm trying to distinguish a point which I think is very important.
Over the years of controversy in the development charges area, we've had the UDI and the developers, we've had the municipalities, and they've been battling back and forth as to who gets how much money, where and how and what from. Yet I think in all of this a very important set of constituents has been missed. Neither the developers nor the municipalities pay the development charges. The development charges are paid for basically by the home buyers in this province and they're paid for by people who invest in this province -- by neither of those two parties. Developers don't pay them; they collect them back from their customers: the home buyer and the investor.
Ford Motor Co down the road -- and I want to give you a very brief example -- bought that land in 1953, when this was called Trafalgar township. They built their own 36-inch pipe from the lake all the way up to their site. They've never used any municipal services that they haven't given basically before they started. There are fewer employees there now than there were 25 years ago. Their trucking goes directly on to the provincial expressway. To replace their aged paint plant and put a new paint plant in place cost them $6 million in development charges. Why? That's how this system works.
Did that system, I ask you, give investors a sense of confidence that Ontario is a good place to invest when you're paying $6 million and getting, quite frankly, nothing back? I'm not here for the Ford Motor Co, nor for Chrysler. I'm here for a perspective which is rather different from the contending parties.
Annually in this province over $50 billion, which is in the order of 60% of our total investments annually, are affected one way or the other by development charges. I think it's time that development charge systems are put in the context of necessary economic policymaking. In effect, the development charges, which began as about $800 to $1,000 in the early 1970s and have now reached as high as $20,000 per lot in some municipalities, have become a tollgate system on investors. Ontario, over those great years, the economically prosperous years, said to people: "You want to invest here? First you pay us, then you invest." We are the only location in North America with a basically unregulated tax system handing over to the municipality the right to charge what they want. That uncontrolled system has gotten us into substantial difficulty, and I've been involved with getting those things resolved, case by case, for the last 15 years of my life.
Having said that, I want to tell you that Bill 98 is a substantial improvement over the act which existed heretofore that replaced the originally Planning Act provisions, so when I'm being critical, I'm not being totally critical. This is a step in the right direction; it just doesn't go far enough.
If I may ask you to turn to my brief for a moment, number 4 on page 2, what I want to say to you is that the bill enacts legislation which is still seriously deficient in critical respects about what constitutes an effective Development Charges Act, an effective way of financing municipal capital expansion in Ontario. I will focus on those improvement matters rather than on anything else.
Number 5: In taxation, you may be aware there was the Ontario committee on taxation, the royal commission held in this province in the 1960s. There are two basic methods of taxation: One is called "ability to pay"; one of them is called "the benefits received." Both deliver equity. The problem with this bill is that it does not yet come to the point where it delivers an economically efficient tax which is also based on a benefits-received principle of taxation.
The concept of development charges is that he who ends up requiring the cost should be the one who bears the burden. This bill does not do that. Particularly in the way this bill reworded its subsection 2(1) from the original act, it broadens it out. It says if you're within the area where the bylaw applies, you pay. Whether you should pay or not or whether you in fact impose any costs or not is not relevant. If you're in that geographic area, you pay. There is nothing in this act, nothing promised in the regulations which says that if you don't impose a burden then you won't have to pay. This act is simply a method of delegating to municipalities the right to tax. I suggest to you that's an economically ineffective thing to do and it doesn't deliver the equity that is essential, in my view, to a sound taxation system.
The bill fails to enforce the critical connection between specific development lands -- let's take the lands north of the Glen Abbey Golf Course over here -- and those costs that relate to the servicing of that land. This simply throws everything into a hopper and says, "We'll all sort of pay something." The trouble with that is that those who impose no cost to the municipality pay lots and those who impose a great deal of cost pay less than they should. It does not lead to a system which delivers equity to the home buyer who ends up buying those homes.
What's more, the system also seriously lacks in accountability in a manner which is rather different from what this bill produces. I've brought these reports. I just want to wave them. These are the development charges pertaining to the town of Oakville, with only one of them missing. I've got them all. I just saw the author walk out of the door of the hotel here about half an hour ago. They're all here. Let me tell you the results that it got historically.
1650
If I may now ask you to turn to the drawings, the first one is past the text. If you have that drawing, what you'll see is a map. On this map I've drawn up every capital project for which development charges were being extracted from the developers after 1980. That goes back now some 17 years. One would think, if you take a look at Oakville, those of you who know this municipality, have watched it grow, that by now these projects would have been built and you would think that by now these people north of the QEW would have paid this and that would be the end of it.
I can tell you, if you turn to the very last drawing of my set, which is the 1993 development charges in Oakville, seven of the 10 projects for which this municipality has been collecting development charges since 1980 have never been started, never mind finished. Eighty per cent of the capital total value, which goes with the projects that I listed on the page after the first drawing, for which people have paid development charges has never been put into capital works at all, at least not in the projects for which it was supposed to have been spent.
After 17 years, where is the justice, never mind the peace, between the people who paid all these development charges living north of the QEW who did not get the capital that they paid for?
The next question is, where did the money go? You're sitting to the north of a lot of it going along the Speers Road area. The largest single project throughout the history of all of these capital projects, study after study after study, is the Speers Road bridge over the creek in the west end of Oakville; Twelve Mile Creek, I think it's called. That's the most expensive single project in every list. It was never built. That bridge has never been built and in 1993 it doesn't even show up any more as a project to be built. What happened to it? Twenty years' worth of Oakville development of all sorts and descriptions paid for a bridge that was supposed to connect Speers Road through to Burlington. The bridge isn't there and the money isn't around any longer either.
What I'm saying to you is that the system we put in place that lets us charge development charges on the basis of some arbitrary standard made up God knows when, so many fire trucks per 100,000 population or whatever, has given us a system which really constitutes a tax up front for capital which is then used as the municipality from time to time may deem fit. It does not in fact constitute a proper system of charges at all.
If you were in the state of Colorado you'd understand that they have rules that are very strict with respect to how these things are collected, who pays for what and how it's to be calculated. This province has had -- and I must say, for reasons not of municipal misconduct, don't get me wrong, but because the province never put in place a regulatory system under subsection 19(1) of the existing act that forced the municipality to calculate levies in a certain manner which delivered equity and guaranteed that the capital would in fact be built.
Never having done so, there's no accountability. What was collected 20 years ago or 15 years ago no one cares less about any more -- except I do. I think the system deserves better. I think it needs to be handled much better if economically it's to be made effective and to be made just for the people of the province.
The recent effort to tinker, if you will, in Bill 98 with 70% and 30% and 10% down -- I understand now it's 100% for something. I saw the article with the mayor of Richmond Hill in the paper this morning. I talked to him about it a couple of days ago at the Royal York. I think that's tinkering forever. What we need is a direct system of engineering calculations -- it's not hard to do -- which says that for every area of land development that is identified by an official plan and/or a secondary plan, there will be a capital budget created and those lands will pay the cost of that capital budget down the road. In the interim, for sure, if a capital budget is created and approved by the OMB, the municipality is obligated down the road to actually build that capital work. Otherwise, people pay and pay and pay, as they've done in Oakville, and don't get it back.
So what I'm suggesting for changes is the following:
Many of the things that are suggested to be done by regulation in this bill should be in the bill. I'm on page 3 of my brief. In particular, I would like to see a clear statement in the preamble of the legislation which sets out that the purpose is to have that land which benefits from the costs incurred pay for those capital works. I don't care if it's 100%. If that land needs it, that land should pay for it. That's fine with me and that's fine with most developers I know too, as long as they aren't paying for somebody else's bridge, but rather they pay for their own.
The implication of this is that the system of development charges requires that different development areas of a municipality will be treated differently and will be paying different charges. That's okay. Some areas of the municipality don't need the bridge; other areas do. Those things are not hard to figure out or calculate and in many parts of North America there are mandated methods by which that sort of thing is calculated. Colorado I think is the best in the transport area.
I recommended that you change subsection 2(l) of this bill. What it says at the moment is disconcerting to me, or at least the people in my profession. It says, "The council of a municipality may by bylaw impose development charges against land to pay for increased capital costs required because of increased needs for services arising from development of the area to which the bylaw applies." If the municipality does, as it will, declare the entire municipality the area, everybody pays it even though not everybody benefits.
In my respectful submission, section 2(1) is a taxing provision, not a development charges provision. I'm not even sure if the province has the right to delegate those powers to the municipality under our Constitution, but that's what it does. It's a taxing provision, it's not a charging provision. It doesn't say, "Pay us for the capital you need." This says, "If you're in this area, you pay regardless of whether you need it or not." I can show you bylaw after bylaw in this province, Brampton's being the most recent, which actually says you pay the amount whether you require it or not. That's section 5 of the Brampton bylaw.
I would suggest to you that it be replaced by a statement which says that you can charge them "against land being developed or redeveloped to pay for such required capital costs as can be demonstrated to be needed to provide for expansions to municipal services which arise from the development of that land." In other words, if you're in an area which needs that bridge, you pay for it. If you're not, you don't. It isn't hard in my view, doing a lot of official plan and secondary plan work, to figure out who needs what.
Let me go to recommendation 2. The legislation should require that in order to have a development charges bylaw, a municipality must construct from its long-term official plan and secondary plans, which are mandated in this province under law, a 20-year capital works program. A difficulty we have is municipalities do a one-year capital works budget -- they have sort of a five-year forecast -- and they're collecting for things that they don't intend to build for 20 years. There is a mismatch in timing. If you're going to let municipalities charge people money for capital works that they want to build 10, 15 years down the road, at least make sure the municipality has an approved 20-year capital works budget, that it relates to those particular works. We don't have that. Why not extend the requirement of capital works out for the same length of time for which we expect people to pay for capital?
(3) To assure proper accountability, the connection of the development charge to the 20-year capital works programs is most useful. Capital works therefore don't become simply cases of wish lists. I could take you through these five volumes; if you want to see wish lists, have a look. I provided the summary of it beside each drawing in the back of this document to indicate what it was each time that we wished to have and in the end of course abandoned and spent the money somewhere else.
(4) The level of service of this 10-year amount I suggest is also another bit of a side venture and should not be permitted. I would think that one should have regulated Ontario standards and not have each municipality choose and pick its own; regulated Ontario standards as to what constitutes the necessary capital standard for our residential developments and for our industrial developments. Otherwise you end up with a municipality that wants high standards, such as Vaughan, for example, next to one that's prepared to accept lower standards in competition, and that causes a dysfunctional economical land use pattern. Why would we allow such taxation arrangements to be all over the map in a competition environment within the GTA? It causes a GTA-wide land use dysfunction that finally takes a depression to wipe out.
(5) Furthermore, the provincial standards should not be allowed to vary among municipalities in order not to distort the sound economic development of land in metropolitan areas like the GTA and like Ottawa.
I think we have to look at this very carefully, having each local area decide: "This is a wish list. We can make somebody else pay for it" -- people who aren't even here yet; investors who aren't here yet and house buyers who aren't here yet -- "so let's just go ahead and do it."
(6) Perhaps most important, the development charges bylaw ought to commit the municipality to the construction of the capital works for which development charges are proposed. This is the dearest to my heart when it comes to the word "accountability." Only in this manner can it be assured that those who pay the development charges actually ever receive the services for which they've paid. That connection assures the full accountability which the public deserves.
1700
Those are my recommendations. They come to you from many years of being involved in the trenches and the struggles and the battles over these issues.
What's required is not tinkering with the existing Development Charges Act but the connection of that act back to basic principles of taxation. We have in this province a very good source for those. We had a commission in 1968 known as the Ontario Committee on Taxation, a royal commission which is still used as basically textbook across North American universities. In that particular volume they recommended against the use of development charges except in certain cases. I still fully concur with the recommendations they had made. If we're going to have them, fine; let's control them very rigidly.
Mr Galt: I think you've answered, actually, most of what I was curious about in the beginning as you proceeded along, but I'm still sitting here a little flabbergasted that money has been collected, they've then changed direction and decided not to build those bridges or whatever, and money was never returned and there was nothing in the act to require its return.
Mr Stamm: Billions upon billions of dollars in this province in the last 20 years.
Mr Galt: Do you have any suggestions? You had suggestions on how to overcome that in the future. What about teeth to make sure those dollars do go back?
Mr Stamm: The ones that were there before?
Mr Galt: Yes.
Mr Stamm: They're long gone. The moneys that were collected in Oakville for the areas north of the QEW were spent, by and large, to improve the Cornwall-Speers Road corridor to the south of here. In other words, 77% of the money that was collected from the north of Oakville went to projects in south Oakville. That's where we got the lakeshore improvements and the Rebecca bridge improvements from. It was collected for projects in the north and spent on the Rebecca Road bridge in the south. The money is gone.
Mr Galt: Because the statement is for the municipality as a whole, not for their specific area.
Mr Stamm: No. When the funds were first collected, based on the charts I've given you, in each case they were collected for the capital projects for this list; for example, here's one list I've provided, and the Rebecca bridge doesn't show up on it. But when it came time to spend the money, that's where it went, because there's nothing that prevents it from being done.
Mr Sergio: I really enjoyed your presentation. Thank you for coming. You mentioned the inequalities within the tax system in the GTA and so forth. We have this problem within the GTA and Metropolitan Toronto. I'm sure you're well aware that Metro is subsidizing the tax base in the regions, and we would like to see that eliminated and have a level playing field. Do you think it's important enough for the government to do exactly that, bring some equity between the GTA and Metro? I don't want to sound too parochial.
Mr Stamm: Yes, indeed. One of the problems that's led to those inequities, though, is that in the outer areas the level of capital services, because of the method of financing, have become extremely high, higher than the economic income capacity of the outerlying areas can afford. So how to go about doing what you're asking cannot be done just through development charges changes.
Ms Churley: I have no questions. Thank you for your presentation. Your enthusiastic and knowledgable presentation is just too complex an issue for me to even begin, in one minute, to address.
Mr Stamm: All right. Let me give you one thing you might want to think about.
Ms Churley: But I must say I don't agree with it all.
Mr Stamm: You don't have to. But do you agree with Ontario getting major jobs and huge investments?
Ms Churley: Absolutely.
Mr Stamm: If you do, I can tell you that I sat there --
Ms Churley: He's asking me the questions. If there were more time -- I do have some agreements and some disagreements, but it really is not possible to get into it.
Mr Stamm: What you'll find is that over the years this province lost two huge, $100-million-plus investment projects of Ford Motor Co because international Ford said, "We're not paying it." I was there.
The Chair: Mr Stamm, on behalf of the members of the committee we very much appreciate your time today. Thank you for the information you've presented.
TAXPAYERS COALITION BURLINGTON
The Chair: Next we will hear from the Taxpayers Coalition of Burlington, specifically Mr Rivers. Welcome.
Mr Ray Rivers: Thank you, Madam Chair. Taxpayers Coalition Burlington is a non-partisan organization that advocates value for taxpayers' money. Originally founded in the early 1990s, our membership has been as high as 600 and is currently in excess of 200 members today. Our president, Hugh Doull, is a former executive with a large Canadian construction company, and our membership and executive includes representatives of the business community as well as others, including the real estate sector. I myself am an economist.
Taxpayers Coalition Burlington is loosely associated with the Ontario Taxpayers Federation and even more loosely associated with the Canadian Taxpayers Federation. To the degree that those organizations speak to provincial and federal governments, we restrict our focus to the municipal level of government and to municipal issues. However, we have appeared before this committee and we are here today again because of proposed provincial legislation that we believe obstructs or interferes with the ability of municipal governments to be more efficient and to deliver lower property taxes and municipal service charges.
Taxpayers Coalition Burlington believes we have been effective in convincing municipal governments to keep taxes down, and we believe that even the province has heard us on issues. For example, we were pleased to see proposed amendments to the Education Act with regard to conflict of interest following a suit that the coalition had initiated against a number of Halton public school board trustees on that very issue.
However, we believe this government is dead wrong on Bill 98. Passing this legislation as it stands will lead to inefficiency in the housing market, reduced international competitiveness, increased traffic congestion and pollution in Ontario and higher taxes for residential and other property owners. It is bad economics, unfair to taxpayers and implies a major tax hike for residents of this province.
There is no issue that has occupied the efforts of the Taxpayers Coalition as much as the demand that developers pay the full costs of new development.
The history in Ontario is that prior to the Development Charges Act, which was introduced back in the late 1980s, and the imposition of lot levies some time before that by many municipalities, the infrastructure costs of new development had been largely paid for by the general taxpayer. Our society had deemed that urban growth was a priority following the Second World War and all levels of government had undertaken some degree of subsidy with general tax revenues at that time. But times have changed.
The tax increases that accompanied the high rates of growth, especially in the 1970s and 1980s, are the result of governments interfering in the housing and development industry with subsidies. The justification that was used by past governments to subsidize housing, which has led to our highly taxed society, was that all growth is good or that growth should be pursued at any price. The myth that the benefits of growth will always exceed costs was supported by subsidies for new development that overbuilt infrastructure and then moved on to even greener fields for even newer development.
It is not that growth is necessarily bad, but that it should pay its own way if it is to be efficient and not leave a burden for others. Our policy states that existing taxpayers should not have to pay for the costs of infrastructure required to accompany new development.
Subsidizing development in the past has led to inefficient development, mostly in the form of urban sprawl, which is the most inefficient form of development one can have. Studies completed for this government by the Golden commission point to the inefficiencies and much greater economic, social and environmental costs to our society that are inherent in greenfield urban sprawl. This is exactly the kind of development that will be stimulated, encouraged and subsidized under the bill as it currently reads. The subsidy provided in the bill will encourage continued urban sprawl rather than renewal of the inner cities of Ontario.
1710
I have attached an article from the Great Lakes Commission, which is an eight-US-state agency established in 1955 to promote the orderly, integrated and comprehensive development, use and conservation of the water resources of the Great Lakes Basin. In the article David Crombie, commissioner of the Waterfront Regeneration Trust and a highly respected Canadian authority on a number of topics -- I know you know him -- especially municipalities, write, "Undeniably, urban sprawl as we know it is not ecologically sustainable over the long term."
The community impacts of the proposed legislation are negative for everyone but the developers. As already noted, this legislation will encourage further urban sprawl, with the consequent effects of greater traffic congestion, higher levels of pollution, disconnected society, high service costs and increased taxes.
Subsidies create market distortions and lead to inefficiency. In the end, they are bad for business. The proposed legislation would have the effect of taking money out of the pockets of the existing residents in a community and giving it to the developers.
The developers, depending on market conditions, may pass on some of that subsidy to the new residential or business occupant through lower prices. But both business and residential taxpayers will ultimately suffer the effect of increased property taxes as a result of this subsidy.
The property resale market will be disadvantaged by this legislation, since the existing building owners' property value will be lowered by the additional supply of artificially priced buildings coming on to the market, subsidized through taxation. The effect will be to lure buyers towards the lower-cost, subsidized properties rather than using and renewing existing structures where high-cost infrastructure is already in place, underutilized and already being paid for by the general taxpayer.
When a new development is created, the residents of that community expect to have schools, roads, water and sewer services, arena and community centres, libraries and other services available for them at a level at least equivalent to that which exists in the rest of the community and municipality. Clearly the developer, and ultimately the resident, should be responsible for the costs to create those living conditions in their community. Subsidization by others in the municipality is unfair and inequitable.
There is a need for development charges legislation in Ontario. However, Taxpayers Coalition Burlington recommends the following:
(1) Enshrine the principle that new development must pay its own way.
(2) Articulate the policy that all capital costs for infrastructure required for a new development, whether that be education, community and recreational services, roads, sewers, water, fire, police and public transit services, and any other services that the province deems to be the responsibility of a municipal level of government, ie, public health, welfare, long- term care, are the sole financial responsibility of the development applicant and proponent and not of the municipal level of government.
(3) Mandate that municipalities establish municipal development charges policies and bylaws consistent with the provincial legislation, setting rates for alternative classes of new and renewed development based on projections of growth and development as set out in their official plans.
A development charges fund should be created and made available to fund the cost of development-related activities, including the full costs of planning, legal and accounting services, and building and development approval processes associated with new and renewed development; in other words, the full costs of development.
(4) Restrict municipalities from paying for any portion of the cost of new development except through the provision of available development charges funds, collected entirely through levies on new development projects, sufficient to meet the financial needs of any development project that is to receive approval. Municipalities should not be permitted to undertake new works for a planned development unless there is sufficient development charges funds to complete those projects.
In conclusion, Taxpayers Coalition Burlington joins with the many municipalities, including Burlington, that have denounced the proposed legislation as inefficient and unfair to the residents and taxpayers of Ontario. Enacting the legislation as it stands will ensure continued inefficient land development and higher property taxes for Ontario, reducing our productivity and making this province less competitive in attracting new business opportunity to Ontario.
Forcing municipalities to pay a subsidy to developers runs counter to other initiatives by the province to give municipalities a greater say in governing themselves, and it imposes an unfair tax burden on their residents. As such, it strips municipalities of their legitimate rights, responsibilities and authority in this matter. I'm referring to the copayment.
Finally, this legislation mandates and imposes yet another tax to be paid by the general property taxpayer in growing municipalities, a tax that gets paid off directly to the developers. Instead of being a tax fighter, it makes this government a tax hiker. Instead of making Ontario more competitive, we will become less competitive. Instead of fairness in development, we see the developers turning an unfair profit at the taxpayers' expense. We urge you to change the bill.
Mr Sergio: Mr Rivers, thank you for your presentation. When we are talking of building a brand-new community, what do you envisage as the most important, first and foremost amenities that should go into that particular community there?
Mr Rivers: The most important?
Mr Sergio: It could be a school, it could be a church, anything else we should have in the particular community other than street lights and stop signs and stuff like that.
Mr Rivers: I think they're all important. A community expects to be a community. It expects to have schools in place. In our community, in Burlington, until recently we didn't have development charges for education; as a result, there have been numerous conflicts over the whole issue of building new schools in communities that simply had not been planned for.
Mr Sergio: The previous speaker, Mr Stamm, said that previous development charges were paid but never used for the intended use.
Speaking from a municipality's point of view, if we were to allow a developer to come in and bring in roads and sewers and start building and selling homes, leaving the community practically naked of those amenities important to the social fabric, such as libraries and community centres and swimming pools and what have you, that particular community will be paying taxes, and in many cases high taxes, for many years without the benefit of those amenities. Do you think it's fair that we put that particular community in such a situation?
Mr Rivers: No, I don't think that's fair. I also don't think it's fair that the general taxpayer would be building those facilities for a community, putting in the capital costs for them. That's the point. It's basically inefficient and it leads to higher property taxes within the community.
Mr Sergio: So it's not a question of accountability on behalf of a particular municipality. We see from other bills that the province wants to discharge a lot of its responsibility on to the local municipality. Here, I don't know if it was you or somebody else who said we are imposing on the local municipality to do certain things. Well, either you allow the municipalities to conduct their business and let them be responsible to their taxpayers or you continue to be responsible for those particular services.
I believe the local municipality down the road will have to be forced to be more responsible, if you will, if they are not responsible now, towards developers and taxpayers, if they want to attract more tax base, if they have land that is staying idle. Would you say that if you are a developer and you are approaching Mississauga, for example, you make a deal with Mississauga instead of having blanket legislation which would tie your hands and force you to do certain things?
Mr Rivers: My view is that the municipality should be required to charge for the full costs of development, and I've outlined those.
Mr Sergio: Or have the flexibility, maybe, to either charge or get the money from somewhere else?
Mr Rivers: Currently, that's what happens. Municipalities do make exemptions, they make provisions, whether it be business development charges or whether it be residential. We have opposed those. The taxpayers coalition has been resolute in saying that the full cost of development should be borne by those who are developing. It's the only fair thing to do.
If you have a municipality, you have a new community that is developing within, and it is imposing costs on the rest of the taxpayers in terms of getting established, those are properly the costs of the developer. They should be borne in the price of the property that is sold. Otherwise, you're subsidizing and creating a market distortion that will come back to haunt you in terms of overbuilt infrastructure, underpriced. It distorts not only the new market but the existing market as well; as I mentioned, the resale market of houses. The way to get rid of that is to simply ensure that the full costs of development are paid for by the developer.
1720
Ms Churley: I'd say hallelujah, Mr Rivers, that you brought up urban sprawl today, because I think over time we're going to hear more about that. This is the first day of the committee hearings, and we've heard mostly, on the whole, from developers today, who of course have a particular perspective, but the urban sprawl issue is a major one. When combined with Bill 20, which you might recall was the government's changes to the Planning Act which literally removed almost all of the environmental protections within that act and not only, I would say, doesn't discourage urban sprawl but encourages it, promotes it, in combination with this bill, you're quite right to point out that we have to think beyond growth at all costs. I thank you for bringing another element into the discussion we're having today.
I wanted to ask you, because we're just here in this area for the day and because we have heard predominantly from one side of the issue, although a little bit from mostly health advocates, what you think overall is the position of people from this area. Do people know about this bill? I know how your mayor feels about it. She made it very clear, believe me, this morning. But the government is going to have to make some pretty fundamental decisions about the amendments. There are some people who would like to see it withdrawn, particularly the mayors. I'm just wondering if you feel this is overall a popular bill with the ordinary people, or do they even know about it?
Mr Rivers: I wish I could say that everybody is totally informed on it. I don't think that's the case. There were newspaper reports, particularly when Mayor McCallion came out very strongly and loudly against it, and of course Mayor Lastman and our own mayor in Burlington -- I'm in Burlington actually -- came out against it as well, and the taxpayers coalition supported the position of these municipalities.
What they find most inequitable and unfair about this is the requirement that they have to subsidize new development. They find that highly unfair, that a municipality is kind of -- it's approving a development on the one hand, but it's also going to have to supply money to the infrastructure, and that's only 10% in the case of hard services, but it becomes 30% in the case of soft. They find that very difficult to deal with, and as a taxpayer, I have a real problem with that.
Let me just comment on the sprawl, because you mentioned it. Urban sprawl is the most expensive form of development. It is why we have high development charges. Oakville here has some of the highest development charges in Ontario, and the reason for that is because it's very expensive to build out into new greenfield areas rather than simply using existing capacity that is there. The studies that were done for the Golden commission and others that have been done indicate that what we want to be doing if we're really concerned about competitiveness and more efficient cities is to build our downtowns, not to go and continue out with the outer sprawl. It's costly, and we see the ramifications of it. To get around Burlington and Oakville now -- the Queen Elizabeth is one of the most congested highways anywhere, and it's because we continue to sprawl new development out there and they have no alternative but to use automobiles.
Mr Jerry J. Ouellette (Oshawa): Thanks for your presentation. You said that the full cost should be borne by those who are developing. Don't you think the users should have any costs or bear any costs in there as well?
Mr Rivers: Yes, absolutely.
Mr Ouellette: The statement said that the full costs should be borne by those who are developing, but I think the user in a facility should be one of the people who pays as well.
Mr Rivers: I'm not quite sure what you mean by "the user."
Mr Ouellette: If there's a sports arena, if you expect the developer to cover the full cost of it, you can't ensure that only individuals moving into the area are the ones who utilize that facility.
Mr Rivers: What I meant, and I think what I said, was the full capital cost, the cost of the infrastructure, to build the infrastructure.
Mr Ouellette: As was emphasized by the previous presenter, do you have any methods of determining where those current costs, development charges, are being spent or how they're being spent?
Mr Rivers: I think the previous speaker hit on some of the problems with it. Nobody says the existing system is perfect. We're both economists. I would agree with him on a couple of points, one being that they're clearly moving towards more marginal costing of development charges. In other words, where there are identifiable costs out there, you should clearly identify them and do the sort of front-ending that can help eliminate a lot of the difficulties. The creation of large funds is not necessarily ideal. But he also noted that there was a timing difference, and that's why you need a development charges fund, because the development that happens today may not necessarily result in the kinds of costs that we see implemented a few years later.
In Burlington, for example, our sewage treatment facility is over capacity currently and will be even more so in the near future. To deal with all the developments that have gone in, it's going to require many millions of dollars worth of enhancement. It really means we need to have some way of collecting from those people who are contributing to its ultimate need for renewal.
Mr Ouellette: I'm surprised there weren't more groups that have presented that actually have a developmental charges monitoring committee, as we heard last time we were in Hamilton.
In your community, are you finding that there are underserviced or overserviced areas?
Mr Rivers: I think that exists in any community. Principally the older areas are the ones that tend to have lower service levels. I live in Aldershot, which is a very old part. It was formerly Hamilton; it is now part of Burlington. We don't have storm sewers to any large extent, not on the street I'm on; no curbs, above-ground wires. That doesn't exist in any of the new developments. I don't think that happens.
Mr Ouellette: You don't think it happens?
The Chair: Excuse me. I'm sorry, we're out of time. There are more questions waiting to be asked, but time is of the essence at this point. Thank you very much for taking your time to come today to present your thoughts to the committee. We appreciate it.
YORK COUNTY HOSPITAL
The Chair: Next we'd like a presentation from the York County Hospital, Mr Kuula, please. Welcome. You'll have 20 minutes in which to make your presentation.
Mr Terry Kuula: I'll be very brief. As you can see from the outline I've presented to you, I have three major points on behalf of the tri-hospital York region planning forum.
The history of capital funding to hospitals has been predominantly from the provincial government. They have always been in place to give us two thirds, or 67%, of all capital funding, with one third coming from the communities. As of July, on the first point, a decision was made by the provincial government to reduce its capital project funding down to 50% and increase the community's share up to 50%. This has put a particularly big burden on the community, since it was an arbitrary change, totally unexpected by hospitals.
The second point: In York region, as in all of the 905 areas, we have seen rapid and extraordinary growth. That growth, as you see on page 2, over the next 10 to 15 years will exceed 50% in a lot of cases, and on average for the 905 you'll have 45% growth. The understanding of the dollars from the development charge is it's for the development of the capital infrastructure and it's to grow those hospitals in those areas to accommodate the increasing needs of the community. Right now the physical plant in a lot of these facilities is deteriorating rapidly and the expectations on the health care system are increasing. So we have them going in opposing directions and the capital dollars needed to keep the growth, not just to maintain it -- the maintenance is the hospital's responsibility but the growth is a very particular interest to us.
1730
In York region, as you'll see in point 3, we just had an acute care study done and the district health council of York region has recommended in that acute care study that $70 million be invested in renewing, in the growth in hospitals, in the health services capital infrastructure. If you take the example, that now from the ministry's point will be reduced to 50% of that, or $35 million. So $35 million will have to come out of the region, and with no development charge, as is proposed, York region would be in a very serious state or deficient in their capital funds.
Essentially, and specifically regarding the proposed legislation, we'd like to see hospitals move from the ineligible list under clause 2 to the eligible category in 5(6).
On behalf of the York region tri-hospital planning forum, I thank the committee for listening to us. We urge you to amend Bill 98 to allow for the inclusion of hospitals as a necessary service, as is the case with the police and fire stations; we feel we are as essential as them.
Ms Churley: You may have heard me mention that there have been a couple of other presentations today on this very issue. I don't know if you all got together first and discussed this or not.
Mr Kuula: No, we did not.
Ms Churley: Even if you did, it's okay. I think the fact that there were so many of you out today gives a clear indication that this is a major issue for you here.
Mr Kuula: Very much so.
Ms Churley: As I also keep saying, mostly we've heard from developers today, but you're the third on this issue. I think there's not a whole lot more to say about it except that I support that and I think the government is hearing loud and clear from the presentations today how important this is to the area because of the growth.
This is my question to you: I assume you're concerned that if this is not included, and you see it as a major component of a community, you're going to be in trouble here essentially.
Mr Kuula: That is very correct.
Ms Churley: There's going to be a crisis.
Mr Kuula: Right now we as a tri-hospital group have received permission to put in an MRI, magnetic resonance imaging, and the region has put $500,000 towards that. They've also funded York county specifically for their day surgery, same-day admit, which is the direction the Ministry of Health is taking on deinstitutionalizing patients and putting them into more ambulatory areas. The region has given us $238,000 for that. York Central has got a regional dialysis unit and they have received $375,000. So all in all in the last year we have received $1 million from this development charge, and it's been significant to us.
Ms Churley: Is it a possibility or have you tried sitting down with the local developers to get some support? Because I know today at least they have spoken against anything except the hard services being included.
Mr Kuula: I have not known of any that has happened, where the tri-hospital forum has actually sat down with the developers, but that would be a good case --
Ms Churley: I think it would be a good idea if the local developers recognized what a problem this would be for the community. After all, they operate within this community and, I'm sure, feel some responsibility. It might be helpful to get them on side and make them aware more thoroughly than today. There was one here earlier who didn't even know what I was talking about and basically just came out and said, "What have hospitals got to do with development?" So I think that might be helpful.
Mr Kuula: In a recent survey, accessibility to health care was the most major concern to people in this country. With growing populations, if we don't grow in step to provide the services that they require -- and again, it's an expectation -- then we fail in our efforts.
Ms Churley: We are talking about, and this was discussed this morning as well, hospitals and health care, that that's essential to a growing community.
Mr Kuula: Yes, the hospital infrastructure.
Mr Galt: Thank you. Just a question to you as a taxpayer, a new home buyer or whatever: If I donate to a hospital, I get a taxable receipt.
Mr Kuula: That is correct.
Mr Galt: But if it's a development charge, it's just an added expense.
Mr Kuula: That's correct.
Mr Galt: Why would I want a development charge when I can make a donation to the hospital and get a receipt and save income tax?
Mr Kuula: Every year our foundation embarks upon a major campaign. We raise approximately $1 million through the foundation. We self-fund approximately $2 million, so we have a $3-million capital plan within our hospital alone. That only maintains the capital equipment required to keep the existing services.
To go beyond that scope, to go beyond and grow -- we have about a $40-million plan to put in a new building to keep things going -- is far beyond the means of the local taxpayer. The local taxpayer is already funding and they're already paying. They're putting forth that $1 million in our area, so we don't see where they could actually come up with the additional 40 times that amount over time to keep this funding going.
Mr Galt: But do you think a young couple just buying a home would be able to support it all?
Mr Kuula: They do it on a one-time basis. They are the ones moving into the area. I don't mean that in a very cynical way, because we choose where we live, but the people existing in the community now have already funded that facility. Because the facility must grow, the burden should now be placed upon everyone to grow. It's not necessarily just the individuals who are moving into the community, because there are other factors that come in, but they should pay a portion of it.
Mr Hardeman: Thank you very much for your presentation. I just quickly wanted to go to the issue you just mentioned: They are the ones moving into the community; they should pay their share of this growth. As my son or daughter is moving into your community, they have paid their share of health care in the province already. Why do we feel that as they move into a new part of a community, they should pay for more than their share of the growth of the health care system?
Mr Kuula: I wouldn't call it more than their share, but the problem is, if they could take that portion of the hospital or the health care infrastructure where they were and move it with them, we wouldn't need the dollars, but we know that doesn't happen.
Mr Hardeman: I guess that is really the question that I wanted to go to: Do you believe the municipality can charge development charges for health care, for building a hospital, when they have no control of where and when hospitals will be built? The concern I have is that, as previous presenters have said, municipalities can charge development charges and then never deliver the service to those people they charged.
The hospital one would be a prime example. They do not control the building of a hospital. They charge for a hospital in your community. Everyone has paid $3 million or $4 million and the province decides not to build a hospital there because it's not appropriate or not required. Do you think that's an unfair charge to those homeowners?
Mr Kuula: For the government to say that it's not required would mean that the population statistics would not be there to support the hospital. I contend that if the population was there, the ministry would be hard-pressed not to build that hospital. That's one point.
The other point is, in York region only about $200 to $300 or $400 of the actual development charge goes to hospitals. Of the $6,000 or $7,000 per unit, only $300 to $400 actually is allocated to the hospitals, so it's not that significant an amount.
Mr Hardeman: But if at the end of the day the $300 or $400 goes to upgrade the hospital in the present builtup area of the municipality rather than in the new part, do you deem it appropriate and fair that the new home owner paid another $400 for a service that everyone else benefits from and to the same extent as the new home owner?
Mr Kuula: As you know, the Health Services Restructuring Commission right now is in a move to close a lot of those hospitals and make the accessibility of hospitals -- I don't want to say equal to all, but the availability will become somewhat limited and the convenience is going to become limited to everyone.
When you say from one area to another, our region extends -- our hospital is in Newmarket and our region extends well up into Georgina, Lake Simcoe, Keswick and those areas. There's no intention of building up there. We are proposing to put a satellite up there to help those people, because it is an underserviced area and it's been well recognized under the acute care study. But again, the dollars for that will come predominantly from all of York region, not necessarily just from the Keswick area. I probably haven't answered your question, have I?
Mr Hardeman: So in your analysis up to this point, is there a connection between the development charges that have been charged for hospitals and where the restructuring commission is putting new hospitals?
Mr Kuula: I don't think the restructuring commission will ever put in a new hospital. I think what they're going to do is take the existing facilities, as they have in Thunder Bay, taken five and moved them into three; in Sudbury, they've taken four and moved them into two or three; and down in Metro, we know they've closed 10 and made two ambulatory. So they won't be building any new hospitals. They'll probably just be expanding upon the new services. In Sudbury, they intend to put 300 beds into Laurentian. Up in Thunder Bay, they're going to invest $140 million into an existing facility. But those dollars are dwindling fast. Realize that it's $140 million in Thunder Bay and in all of Metro they've only allocated $130 million. The rest of that has to come from the community.
Mr Sergio: I'll just say congratulations on your presentation. I really don't have any questions. I've been listening to your comments and the answers you have to give, and I'm satisfied. I support your concerns and I hope the government is listening and will make those changes.
Mr Kuula: I don't know about listening.
The Chair: Thank you very much, Mr Kuula. We appreciate your taking the time to bring your perspective to the committee today.
1740
DALEROSE CORP
The Chair: We would now welcome Mr Bryk from the Dalerose Corp, please. You have 20 minutes to make your presentation, including questions from the committee.
Mr Ted Bryk: My name is Ted Bryk and I am the president of Dalerose Homes. For the last hour or so I've been sitting here listening to the deliberations, and I find them very interesting and informative. One thing though: I'm going to be bringing a different perspective. I'm going to be bringing the perspective of the tax collector because as the builder I am the tax collector.
Our company has been building homes since the mid-1980s -- I myself started out in 1971 -- in communities throughout the greater Toronto area. We currently have a 119-unit, freehold townhouse project under construction right here in Oakville, just up the road, called Trafalgar Ridge.
Our firm is very involved in our industry through the home builders' associations. I myself served as president of the Greater Toronto Home Builders' Association in 1984. I also served as president of the Orangeville Home Builders' Association in 1992, and in 1994 I was proud to serve as the national president of the Canadian Home Builders' Association. I am here today with my Dalerose Homes hat on, but I will be drawing on some of the information and experience I have gathered through involvement as a local and national president.
First, let me admit that I am not familiar with the intimate details of Bill 98, as maybe Mr Stamm was. I am, however, intimately familiar with the details of building homes, and as a home builder I know that in the last six years the cost of building my product has been going up steadily at the same time that the price I am able to command has been going down.
The goods and services tax and the 1991 Development Charges Act have both been crushing blows, coming as they did when our economy and our industry were in a steep downturn. In a fiercely competitive business, a lot of us builders have gone under, and those of us who remain are working for cash flow and praying for profit.
As a home builder, I know that the buyer ultimately pays the price of any government-driven cost increases. We work on a pro forma basis, where all costs are determined as part of setting the final price. If the costs dictate a price which is too high for the market, we'll return to the drawing board and change the product. Either way, the consumer pays.
As a builder, I can also tell you that development charges have come to represent a major cost factor in my business. Since we're here, let's use the town of Oakville as an example. In 1993, in the middle of the longest recession our industry and this country have ever experienced, the town of Oakville introduced a proposal to increase its development charge by 86%, from $5,674 to $10,591, overnight. The industry, of course, reacted with shock and outrage, but the reality is that Oakville was no different than a lot of other municipalities in the GTA. Oakville was simply taking full advantage of the legislation passed by the Liberal government at the height of the boom.
In the end, after filing an OMB appeal and 18 months of negotiations, the industry was able to achieve a reduction in the charge to $6,900. But you have to remember we still have to pay the Halton regional charge as well as the Halton education development charge, so development charges on a single detached home in Oakville are still approximately $14,000. This, my friends, is not a pittance. It begs the question: What is this money for? Is every last nickel essential or could the charges be reduced with a little honesty on the part of the municipality? Are we servicing wants or needs? Can we afford the long-term operating and replacement costs of the facilities we are building using development charge dollars?
Let's look at Trafalgar Ridge, which incidentally is targeted at first-time buyers. To get this 119-unit project off the ground I wrote a cheque to Oakville for more than $1.4 million to cover the local, regional and school board levies. This is before I paid for all the roads, all the services, all the parks, the improvement, the widening of Trafalgar Road, the stoplights. I wrote a cheque for $1.4 million for the privilege of building in the town of Oakville first-time-buyer, freehold townhouses.
To put that number into some kind of perspective, I can tell you that the people who have bought these homes are scraping by as first-time buyers. They have scratched and clawed to come up with the down payment and they are as scared as they are excited. The scary part for me is that most of these people have less down in their house, with the five per cent program, than it cost me in levies per unit.
As past CHBA president, I recently received a comprehensive national study of levies, fees, charges, taxes and transaction costs on new housing. This is the report; I hope it's available. It was produced by the Canadian Home Builders' Association; it's a cross-Canada study.
Let's play a little trivia here: On a $217,900 house in the city of Mississauga, what do you think the various costs I just listed would amount to? Anyone want to hazard a guess? Well, let me tell you that it's a whopping $45,486, or 20.9%, of the total purchase price. One more example, the city of Vaughan, which you heard about: On a typical detached home there the total charges are $50,326, or 21.9%, of the purchase price. It's all well documented.
I ask you, are things out of whack? I certainly think so. I read an article in the Star the other day where David Lewis Stein seemed to be paraphrasing the mayors in arguing that builders won't pass on any savings from lower development charges. I have several reactions to that: These same mayors kept on raising development charges when house prices were going down. Would they like to sit in my shoes and take the risks? Do they understand that with profitability comes reinvestment, comes jobs, comes growth? Have they noticed there are literally hundreds of housing projects throughout the greater Toronto area engaged in stiff competition for a still very cautious home buyer?
Please remember one basic premise: I, as the builder, cannot influence the market price. New homes are less than one-third the total market. The resale market dictates price. My competition is the used-home market. When I'm confronted with government-driven cost increases, I have to speak out. Why? Because these cost increases severely reduce my ability to compete with the used market. The GST is the classic case of a tax which put me at a severe disadvantage with the resale sector.
On the other hand, the land transfer tax rebate introduced by the provincial government last year is a direct benefit to my customers and makes me more competitive with the used market. Don't think for a second that I raised my prices $1,725 to reflect the rebate the customer would receive. That is a totally and utterly foolish thought. In fact, that $1,725 they were getting back went nicely to cover the educational development charge increase that the homeowner was hit with.
If the municipalities are so concerned that the savings are not going to be passed on, perhaps they should collect the tax and be directly accountable to the purchaser. Then they could compete with each other to attract growth. I don't want to collect the tax. If you want the tax, you collect it. Don't think I'm going to keep it, because all I am is a tax collector.
1750
If a no-growth attitude prevails, then raise the tax so no new housing or businesses are built. Simple solution to the advocates of no growth: If you raise it up high enough, you won't have anything and everybody is happy. All the growth will go right by you.
In closing, I want to reflect on some of my observations when I travelled across the country as president of the Canadian Home Builders' Association. In all parts of Canada except Ontario and the lower mainland of BC, most industry people, when I spoke, thought the DCA, when I referred to the Ontario experience, was a new model of an earth mover. They didn't even have one idea what a DCA was. When I would relate to these listeners the level of taxes we paid to our municipalities, they were aghast. In fact, these guys, when you go out to central Canada or the Maritimes, used to get aghast when the building permits went up $50. When I told them what we were paying for development charges, for the privilege of building in that municipality, they just asked us: "Why are you there? What are you doing business for?" Good question.
Also, in most jurisdictions the DC in Oakville or Mississauga would be greater than the total cost of the serviced lot. You ask, why are house prices cheaper in so many other parts of the country?
My appeal to this committee is to recognize Bill 98 as an attempt to bring some sanity to a system that is out of control. I think Mr Stamm really brought that to light.
I don't have any specific recommendations for you, just a general urging to be sure that you come down on the side of lowering development charges, but consider the tax to be fair and accountable, and consider affordability -- because it's the homeowner who's going to pay for it -- and the creation of jobs and economic growth.
I'll close by telling you that for every one of those 119 town houses I'm building up the road, I'm creating roughly two and a half full-time jobs per year, approximately 300 jobs. If you want to go and see something, just go up there on any particular day and see the number of men and women working there, the supply trucks and all the machines and equipment going in. I created the jobs, not the government. I put my money on the line, not the town of Oakville. I gave them the money. So this is where the job creation occurs, by the small business. Let's not lose sight of the fact that a small business is taking the risk and creating the jobs, not any level of government.
Thank you for your time today. I'd be delighted to respond to any questions you may have.
The Chair: We'll begin with the government caucus, Mr Clement, for questions.
Mr Clement: Mr Bryk, thank you very much for your explanation of your industry from your point of view. An earlier presenter, Mr Cherniak, I believe it was, referenced in his written submission that these development charges are akin to a drug: Once the municipality gets hooked on it, it's very hard to extract itself. One could go so far as to say that this is the crack cocaine of municipal finance that we have here. I wanted to know how you felt about that. Have you been dealing with municipalities that seem to be always increasing development charges, never decreasing them, and have you found the same resistance that Mr Cherniak found in terms of trying to extract these municipalities from clearly outrageous development charge schemes?
Mr Bryk: I've had a lot of experience in talking to municipalities. I've been active very vocally locally in my position as president.
Two things happen. One thing that really gets to me is when municipalities are in competition with each other for who's got the highest development charge. I didn't realize it was a contest, but believe me, when you go into some municipalities -- and you don't even realize it -- they're saying: "Down there, they charge $18,000. How come we can't charge that?" "What is this, a contest?" I keep saying.
The other aspect is that they've always got the idea that we're taxing a new person coming into the community, "Let's get them." Do you know the project up there, 119 units? Do you know where most of the people are coming from? They're the sons and daughters of all the parents living in Oakville -- 80%. So who are they shafting? Their own. They're not coming in from Saskatchewan; they're just moving across the street.
Somebody was talking about hospital zoning: "Let's shaft them. Why? Because they can't speak." The whole object of the game is -- I don't care, I'll tell it to any politician -- if you can keep your tax base low, no matter where you get your money, you'll keep the electorate happy. How many times we're going through and they have not raised taxes? But have they gone ahead and done the other cutbacks municipally that we've seen the other levels of government do? As long as they have that fat cat -- the development charges -- they can keep on and they can brag about a 0% increase.
But they have never laid off. I challenge anybody to show me any municipal government in Ontario that's laid anybody off in the last few years while the provincial and federal governments have been doing cutting, because they've got the development charge.
It's a beautiful tax, and that's all it is. And I'm your tax collector. I'll tell you, I just keep passing it on, and you think I'm going to swallow that? Forget it. But I have swallowed it when the marketplace comes down, the resale market comes down. Do you think I can sell my house for $200,000 when across the street you can buy a resale for $175,000? The consumer is not a fool. He'll buy across the street. So what do I have to do? And forget whether I paid the GST, which is another horrendous hidden tax, and a development charge.
That's why I say put the development charge tax up front. All my homeowners don't even know what they paid for the DC. I myself wanted to go ahead and show it as a tax on closing so they could see that they're paying $14,000. And then they start asking, "For what?" "Oh, your contribution to the hospital, your contribution to the school." "But I paid that with my parents." "Sorry, you're the new boy on the street." Let them see it, and it be accountable to the municipality. Then they'll see what it's like to feel they're the home buyer.
Mr Clement: Do you want to weigh in on this, Mario?
Mr Sergio: You really answered all my questions. Thank you for coming down.
Mr Bryk: Thank you very much for listening.
The Chair: Thank you very much, Mr Bryk. We appreciate your taking the time to come today.
MONARCH CONSTRUCTION
The Chair: Our final presentation today is from Monarch Construction, and we welcome Mr Bryan. You've been waiting patiently. I know you know you only have 20 minutes. Welcome.
Mr Mike Bryan: My name is Mike Bryan and I'm the last delegation before you.
The Chair: Last but not least.
Mr Bryan: Last but not least. I would like to thank Gordon Wong of the ministry office for being so helpful in coordinating my appearance before you today.
Since I am appearing last I will keep my presentation brief. I have purposely not made my presentation technical in nature but rather anecdotal and general.
A short introduction will probably help the committee understand what influences have shaped my presentation. I am presently employed as a vice-president with Monarch Construction Ltd. Monarch is a public real estate company based in Toronto which is engaged in the fields of residential land development and new home construction throughout Ontario and the United States. The Monarch group of companies is also engaged in the development, construction and management of a significant diversified portfolio of industrial, retail and commercial properties in and around the GTA. I might add, Monarch was founded in Toronto in 1917, and in 1996 recorded its 56th consecutive year of profitability. I can honestly tell you I am not in any way responsible for the company not being profitable 57 years ago.
My personal background is that in the past 24 years I have worked for only two different employers. I was employed by the city of Burlington for 15 years in progressively responsible positions and was the assistant director of the building department when I left to join Monarch Construction nine years ago.
I was educated in community planning. I have a diploma from Sheridan College and a degree majoring in urban studies from York University.
Having worked in government I can look at these issues from both perspectives. Some of the brightest people I have known work for government, but protocol and the system often prevent them from achieving maximum results despite their significant personal skills. I can tell you that the decisions I am able to make today, with a minimal amount of involvement from my superiors at Monarch, would be envied by my former municipal colleagues. I therefore say to you that this government's move towards privatization is the correct one. I would caution however that too much haste could ruin a good idea.
Municipal governments at both levels have significantly changed the way they operate in the 1980s and 1990s. The affluence that came from increased development and tax revenue during the 1980s and the introduction of the Development Charges Act in 1989 resulted in a more aggressive bureaucracy at the municipal and regional levels that was going to provide their public better and more bountiful services with this revenue. You need only to look at the quality of municipal buildings and parks and the facilities that have been provided to get a feel for what I mean. Even the hydro commissions got on the bandwagon.
The problem is that at precisely the time municipalities were given greater powers to demand money for a wider range of uses and increase their standards dramatically, the economy was entering the longest continuous recession in a very long time, and I caution you now: This minor recovery we are experiencing is directly related to low interest rates and the fact that government is finally starting to steer the economic ship in the right direction. A change in the interest rate structure, based on external factors such as the economy in the United States, will stop this recovery. Witness the mini-recovery in 1994; it stopped abruptly as interest rates increased.
1800
But from the mid-1980s to the present, development charges doubled and in some cases tripled. New charges for hydro and education were also added on top of municipal and regional development charges that had doubled and tripled. To add to our misery the province, through its ministries, was creating new and expensive standards in environmental, transportation, planning and building code areas, all increasing the cost of providing serviced land and the time in which to provide it.
Finally, to conclude this litany of woes, the federal government, almost singlehandedly, brought housing to a standstill with the GST. What better tax than a tax on housing? All of a sudden land, which is not a manufactured item, was taxed on the same basis as building materials. When I reflect back on my public service, I am sure my colleagues were not trying to hurt our citizens by increasing their cost of living so dramatically. There seems to be this feeling that new home purchasers are new residents, so why not let them pay, but a large percentage of them is not. They have lived in the community as renters, homeowners or sons or daughters. Mr Bryk referred to that, and the delegation from the hospitals took the opposite view: "They're new, so why not hit them?"
What has been the result of change in the way municipalities viewed new growth? In Halton, for example, industrial and commercial development has had to contend with one of the highest development charges in the province. This is the total of regional, municipal, hydro and educational development charges. Consequently, in the new growth areas there is virtually no growth.
Regional development charge revenue for new industrial-commercial uses is a small fraction of all development charge revenue, thus infrastructure projects that are required do not have the necessary funding. Consequently, the region and municipalities are forgoing much-needed tax and fee revenue that new growth provides. Employment growth in Halton lags behind virtually any other metropolitan region in the GTA. I would suggest that if the Ford Motor Co were looking to locate their assembly plant today, they would not choose Halton.
On the residential side, the development charges are also one of the highest in the province once again, especially when you compare the development charge to lot value. A $15,000 development charge is easier to absorb on lots worth twice or three times the value in the Metro area than in Halton. These examples apply throughout the province.
Regarding the proposed legislation, it is certainly on the right track. The soft side of services is out of control. Copayments will curb the desire to gold-plate projects. Many extravagant facilities would have been scaled down considerably if the taxpayer had to contribute to the funding. Examples such as wave pools are nice to have, but why should they be built on the backs of new home purchasers or the new industrial-commercial project that provides new tax revenue and employment?
The priorities of municipalities have somehow altered over the years. It used to be that affordable housing was encouraged, but this is increasingly difficult to provide when well over 10% of an affordable home goes towards development charges and the cost of bringing the unit through the approval process. The length of the process adds to the cost of providing housing.
The acknowledgement that new facilities serve the existing community is essential to bringing some restraint into the provision of services. Often the municipal sector justifies these splendid facilities by stating that this is why new people come to the community, because of the services. I can tell you that with these hard times the average consumer is still facing, and will be for the foreseeable future, the lowest price is the most important aspect of the purchasing decision. Mortgaging $15,000 in development charges is not a welcome proposition.
With respect to the contribution to hard services, there is no doubt that the existing community benefits from most hard services, and I understand there was an announcement on that today. You should know that nowhere in this development charge debate, or in the calculations used to determine development charges, is there any recognition of the large sums of property taxes that are paid for undeveloped lands held for development, or developed but vacant lands, ie, lands that consume no services. In effect the 10% contribution may be substantially covered by the development community in their taxes from their land holdings. In the private sector it is often said, "I don't mind spending money to make money." Not so in the public sector, and this is clearly shortsighted.
Recognizing net capital costs and acknowledging that capacity serves the existing community is not just a good idea, it is fundamental and it is fair. The accounting principles appear on the surface to provide the groundwork for a fair accounting. Bringing surplus funds from previous development charge bylaws into new bylaws is also fair. Mr Stamm clearly indicated the problems involved in that.
One aspect of the legislation that does not make sense and goes against the principles of fairness fostered in this legislation is the forgiveness of section 14 credits, credits which were earned prior to DCA 1989. These credits can be substantial and were provided by contract for the provision of external services which benefited the community at large and other developers. Why should they be lost? This is unjust enrichment to the benefiting municipality. Under any other reimbursement situation some form of reimbursement would have been made. That's a tough sentence. I'm not a lawyer -- that must be why you are being so nice to me -- but this is clearly breaking an agreement between parties.
I ask this committee to help return this province back to prosperity and help provide its citizens with affordable housing. Create jobs and revenue. Get the construction industry back to work. Stop the aggressive spending of development charges by recommending the changes proposed in this legislation. Thank you very much.
Mr Sergio: I have enjoyed your presentation. You were supposed to be short, but you took your time. I have listened very patiently and I've enjoyed what you said. I don't agree with everything you have said but I appreciate your coming and exposing your views as a developer. I also don't think that everything is fine out there and I think there are some areas that need to be rounded up. Again I thank you for having come. Let's hope that by the time the hearing is over, we can have some reasonable amendments so that both sides can be happy.
Mr Bryan: Thank you very much.
Mr Carr: Thank you very much, Mike, for your presentation. You've got an interesting background. You have served in the public sector and seen both sides of it, which I think brings a really interesting perspective because you have had that other side of it in working. I knew a little bit about your background but I didn't realize it was so detailed. Many of the other presenters have come and made passionate speeches, as the previous gentleman did.
One of the questions we keep getting asked is what will happen with regard to where the money will go with development charges. A lot of them are saying it won't go back. Some of the other presenters have talked about the competitive nature versus the resale market and how competitive it is, which may account for it. Is there anything else you can talk about regarding what will happen to development charges when a lot of people see it just going back to the developers and that it won't be passed through? Are there any assurances you could give? How do we see it working, bringing both your perspectives to the table?
Mr Bryan: I just think that perspective is a 1980s perspective that no longer applies. Monarch Construction is a company that has banked land over the years, so we have fairly good margins in certain situations when we have historical land. But I can tell you that the way we're selling it now, it's not sustainable to keep it going. There has to be an improvement in the profit margins in our industry. A company like Monarch, which through its resources over the years is able to invest wisely, has been able to weather the storms of what's happened in the industry.
1810
This industry is crippled. This industry is hurting. The margins are terrible. Lumber, for example, in the past year has gone up $6,000, $7,000; there's not been $6,000, $7,000 in price increases. I just really think there's a lot of blatant envy from perhaps the 1980s and some of the things that have happened over time. I really believe we're in a new era. That's what's happening. You're going through the very difficult task of restructuring everything because it needs to be restructured. We've already done it and we've streamlined and we've done all the things we've had to do.
Mr Stamm's comments were very appropriate. I have seen the way governments have changed, I have seen the way they have just gone from providing basic needs to being excessive, and that has to stop. There isn't the room that people think there is in our industry, and the winner will be the consumer. I can't guarantee that on every single example. Obviously, when you get into higher-priced homes, that might not be as appropriate. But I can tell you that most of the customers out there today, as you are very well aware, are first-time home buyers and every penny counts.
Mr O'Toole: I appreciate your presentation and your unique perspective, the first one today anyway. I just want to have you reaffirm that you're saying that when the development charge process came in it was sort of a get-rich-quick phenomenon, that you think the level of service, without any qualifications, has gone up substantially.
Mr Bryan: Tremendously.
Mr O'Toole: And now the ability to sustain that level is the problem when the economy itself has taken the other angle.
The one thing I wanted a little better understanding on is the whole theory of collecting the cost of capital over a bunch of acreage, a number of lots, that this is equal to the amount of capital we have to put in here. That's predicated on all the development going sequentially and kind of fresh, otherwise somebody's got to put it in ahead of the actual development. Usually it's the developer if he wants to keep moving. Is this really happening?
I'm not in the business but I'm saying okay, I've seen land that got hit in the early 1990s that's just now got the odd house on it, but somebody has been carrying all the cost of service in there big time, maybe 500 acres fully serviced, and taxed, by the way, not as agricultural but as land in development. Two or three have gone bankrupt on this one strip that I'm aware of, 500 acres. This isn't really part of this here, but they're almost forcing the developer to put in this bridge or connecting road, maybe even external, to make things work. Is this going on today?
Mr Bryan: There's a lot of front-ending going on. In Halton, if you flush another toilet you're out of capacity,
and it's a real problem. There are all kinds of front-ending things going on and all kinds of deals being made, and if a developer has a large investment and has to get moving to survive, he will come up with the money that is needed. So there's a lot of that.
Mr O'Toole: Do you have a problem with the whole idea of the capital, hard services as being completely a development responsibility? Are they inside the margins of their development? Who can argue with that, really? The hard services.
Mr Bryan: I believe there is a non-growth component to hard services. I've stated that today. I believe that, there's no question. But that is certainly --
Mr O'Toole: Hang on. You say there's a non-growth component to hard services?
Mr Bryan: Yes, a percentage. I'm saying there's a community benefit to hard services.
Mr O'Toole: About having a road inside your subdivision?
Mr Bryan: Oh, I'm sorry.
Mr O'Toole: Hard services.
Mr Bryan: No, we would pay for the whole road.
Mr O'Toole: The whole 100% there.
Mr Bryan: Yes, that would be reasonable.
Mr O'Toole: Soft, like libraries, fire and all that stuff.
Mr Bryan: And major arterials, major trunks, there's a community benefit to that. But certainly anything internal to your project, if it's not unusual, should be your cost. Growth should pay for itself. It's arriving at what that is. Right now we've lost our credit card and we want it back.
Mr O'Toole: I'm going to ask one thing from you. I appreciate the indulgence. On the soft services, let's say that today the level of service -- I'm making this up -- is one fire truck for every 1,000 people and you add 1,000 people in your subdivision. Now we end up charging you for one additional fire truck. But let's say now, because of the enrichment, we go to one fire truck for every 800 people. That 200 people -- whatever that factor is for the cost of the fire truck, should be passed on to the existing residents. The rest is you, because we've got to maintain a level of service -- police. You've got to maintain it, wouldn't you agree? We're not getting rich here.
Mr Bryan: It's happening all the time. In Burlington they went from a seven-minute response to a four-minute response. Growth is paying for all those upgrades.
Mr O'Toole: In that case there it shouldn't be borne by that development. It should be borne by the whole municipal structure.
The Chair: Mr Bryan, thank you for taking the time to come today. We've had some interesting presentations. Yours is the last, so we'll adjourn and reconvene tomorrow at 10 o'clock at the Radisson Hotel in Ottawa.
The committee adjourned at 1816.