DEVELOPMENT CHARGES ACT, 1996 / LOI DE 1996 SUR LES REDEVANCES D'AMÉNAGEMENT
REGIONAL MUNICIPALITY OF NIAGARA
NIAGARA HOME BUILDERS' ASSOCIATION
UPPER CANADA PLANNING AND ENGINEERING CONSULTANTS
CONTENTS
Wednesday 26 March 1997
Development Charges Act, 1996, Bill 98, Mr Leach /
Loi de 1996 sur les redevances d'aménagement, projet de loi 98, M. Leach
City of Niagara Falls
Mr Ray Kallio
Mr Norm Puttick
Regional Municipality of Niagara
Mrs Jill Hildreth
Mr Shafee Bacchus
Metrontario Group
Mr Paul Mondell
Mr John Crossingham
Niagara Home Builders' Association
Mr Ian Rawlings
Mr Larry Szpirglas
Jannock Properties
Mr Mitchell Fasken
Upper Canada Planning and Engineering Consultants
Mr Richard Hodge
Mountainview Homes Ltd
Mr Monty Vandeyar
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 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 James J. Bradley (St Catharines L)
Mr TomFroese (St Catharines-Brock PC)
Mr JohnGerretsen (Kingston and The Islands / Kingston et Les Îles L)
Mr ErnieHardeman (Oxford PC)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr MarioSergio (Yorkview L)
Mr FrankSheehan (Lincoln PC)
Clerk / Greffier: Mr Todd Decker
Staff / Personnel: Mr Ray McLellan, research officer, Legislative Research Service
The committee met at 1008 in the Ramada Parkway Inn and Convention Centre, St Catharines.
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): I would like to welcome everyone to the third day of public hearings on Bill 98. We are very pleased to be here in St Catharines and look forward to the presentations as they unfold today.
Just a reminder that the minister has released proposed draft regulations for Bill 98 which are available at the table, and in his opening remarks he indicated, and I quote, that he intends to move the following motion to amend Bill 98 during clause-by-clause review: "The requirement that municipalities contribute 10% to the growth-related costs of water and sewer systems, roads, hydro and fire and police services would be removed from Bill 98."
CITY OF NIAGARA FALLS
The Chair: I welcome our first delegation, from the city of Niagara Falls. I believe it's Mr Kallio, the city solicitor, and Mr Puttick, a councillor. Is that correct? Welcome. Your presentation time is 30 minutes. That includes your presentation and questions from the caucus.
Mr Ray Kallio: Thank you, Madam Chair and members of the committee. On my left is Mr Sam Iorfida. He's the manager of development for the city of Niagara Falls. He'll be my technical adviser.
I should also mention, Madam Chair, that just as we were pulling out of the parking lot, we received hot off the wires the press release with respect to the 10% reduction being eliminated or being proposed by your government to be eliminated. Obviously my comments were prepared before that time, so we'll try to work around that.
Madam Chair, the city has supplied our comments. These are brief points, but we ask that this committee consider them and reflect upon them in its deliberations.
The city of Niagara Falls does oppose Bill 98 wherein the bill purports to change the rules of the game with respect to development charges established pursuant to the Development Charges Act.
For a number of years, municipalities and developers both stated that there should be one clear set of rules or guidelines to regulate the industry, to have a level playing field. That was finally done in 1991. Hundreds of thousands of dollars were spent on consultants. Municipalities took it very seriously, knowing that developers or representatives of the development industry could appeal to the Ontario Municipal Board, and, as I understand it, very few of these bylaws were appealed.
Things were working fairly smoothly, we thought, from the municipal side; obviously the other side has a different motivation. We just have to wonder why, when it ain't broke, you're trying to fix it, why you have the 10% and 30% and now we're down to the 30%.
For a number of years -- I've been a lawyer for 20 years now, primarily with municipalities -- it was always sort of an ebb and flow: There would be a case at the OMB that the developers would win and they'd pat themselves on the back, and then a couple of years later the municipalities would win and they'd pat themselves on the back. It went back and forth, initially with hard services, then with soft services. I can remember our development agreements. We would have to put boilerplating on it to ensure there would be no review by any court etc. There was a lot of wasted energy. Everybody was trying to protect their own interests: the municipality, the public interest; the developers, their own interests.
When we have a set of rules that I think we can all live with, I would urge this committee to consider that the tinkering and the tampering with something that is working well, where time is money to both sides, should really be proceeded with very cautiously.
We have looked at the Association of Municipalities of Ontario's key policy positions. We thought it was an excellent presentation, dated February 20, 1997. The city of Niagara Falls supports it 100%, and there are several key features, if I could briefly just go through them.
The first point AMO made was that Bill 98 would erode the municipal responsibility for determining local property taxation policy. This is a theme that AMO and all the municipalities, which I'm sure you've heard, have said. The fact of the matter is that there is a balance in development charges, the balance being that new growth should not subsidize existing taxpayers and, likewise, existing taxpayers should not subsidize new growth. The entire exercise, at least we thought from the municipal point of view, was to try to get this balance. So where there was excess capacity, the developers got a credit. Where there was a benefit to the existing taxpayers, the developers got a credit. It's this balance that has to be maintained, and if you swing the equilibrium too far one way or the other, you throw it out of kilter, and it will take years to get back.
The fact of the matter is that the taxpayers do not want to subsidize new growth. The taxpayers are very conscious of the fact that the new residents, while they welcome these new residents, will be driving on roads that have been paid for, will be attending at libraries that have been paid for already by the taxpayers, will be attending at arenas. Likewise, the new pool goes in and existing taxpayers will be using that pool. You have to strike and maintain this balance.
So if the whole philosophy of the Development Charges Act, the 1990 act, was to strike this balance, subject to review by the Ontario Municipal Board -- where are the new growth benefits, where are the benefits to the existing taxpayers? -- this 10% and this 30% doesn't make sense. It's illogical. To try to say that it's to boost this industry or that industry, it wouldn't sit well with the taxpayers, and I'll get to that later on in my presentation.
Bill 98 restricts the municipal autonomy and authority to deliver infrastructure services and will further destabilize the municipal revenue base. AMO, which the city of Niagara Falls agrees with, is asking to remove the requirement for the mandatory municipal copayments from non-development charges at sources.
The next one is that if a service level and service standards are needed, they should be based on a minimum of 10 years, with the ability to project growth funding needs for service categories to the ultimate development scenario.
As we read the bill now, you can go back 10 years to get your average service level, and that's fair to a certain extent. You can't now all of a sudden when you have the opportunity, as they did in 1991, go crazy and have the gold-plated services that we've heard so much about from the development industry. But by the same token, you have to look further ahead as well. There are different trends, different changes, primarily in the soft services, and there should be, in our respectful submission, a balance again: to go back five years or a reasonable period of time to establish your average services, and that's fair, but also to be able to look ahead, to deal with trends or matters that we don't know about now. To be locked into a 10-year period, I submit, will be unduly restrictive to a municipality's ability to change.
Likewise, the second-last point: The municipal service level standards should not apply to services where the province sets the standard of service. As we understand it now, it is slowing down, but in past years there have been numerous provincial directives forced upon municipalities, and municipalities had to deal with it. If we are now to be restricted in what we can deliver in terms of services, there should be some consideration given when it's provincially mandated. There have to be some allowances made, in our respectful opinion.
The last point AMO makes on the first page in our view is a very significant one, and that is that municipalities should determine what services are needed within the service categories. For example, if facilities such as museums and theatres are desired by a community instead of soccer fields, they should be eligible as part of the recreation service category. Again, the theme that AMO is presenting, the theme that we hope to convey to you today, is that there are local needs, local responses, that should be considered, rather than the broad-brush approach.
As we'll state later on, we're worlds apart from GTA not only in terms of distance but also in terms of needs. If you look at our development charge and compare it to the city of Vaughan, not only monetarily is there a vast difference, but the fact of the matter is that people in Vaughan, if the development industry calls it gold-plated, they want gold-plated. They know what the cost of a house is, and they know what the value of their home is and what they can sell it for. You compare the housing market in Vaughan to Niagara Falls: worlds apart. But Niagara Falls, for example, hosts the Coors Light slo-pitch tournament. It brings in millions of dollars to our economy. We want baseball fields, but if we were more culturally inclined and we wanted museums or theatres, it's what the municipality wants, it's what the taxpayer wants, and if the taxpayer doesn't want that, the taxpayer will vote at the ballot box if the local politicians aren't responsive to what the taxpayers want. It shouldn't be dictated by the development industry; it should be dictated by the people. I don't want to sound preachy on that point, but the fact of the matter is that each municipality, we submit, is different and has different needs.
The next point on page 2 I think has been dealt with, given the press release we received today with respect to the hard services.
Municipalities must be able to clearly link the planning approval of a development to the external services to a site that must be constructed prior to development. The bill would not allow this because of the copayment requirement. Given the process that is in place for passage and approval of a development charge and the attendant right of appeal, there would be sufficient safeguards to protect the development industry: again, the balance between a municipality determining what it can afford and what new growth should pay for.
As well, the last point at the top of page 2: The costs of the studies required for the preparation and defence of the development charge bylaw should be recoverable under the development charge bylaw. In our view, that just makes sense.
We'd like to deal with the experience from the city of Niagara Falls. When our development charges bylaw was passed in 1991, there was full consultation with the local development industry. As a result of these consultations and meetings, city council lowered the development charge from that recommended from our economic consultants, which consultants were prepared to go to the Ontario Municipal Board and defend their numbers. City council looked at the numbers, heard the concerns of the development industry and lowered the development charges. As well, the development charges were phased in over a period of time, a five-year period for the commercial charges. The residential charges were phased in over a three-year period.
We don't know if any other municipality did that, and quite frankly, I don't think city council cared. They wanted to do what was right for the development industry and what was right for the taxpayers and the new residents.
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The next point is that the bill sets out what the hard services are but doesn't set out what the soft services are, which may lead to conflicting interpretations and costly appeals.
The 30% reduction for soft services in our submission is too drastic. The effect of this could be that where there's a contribution required by the taxpayer, a municipality may be very reluctant to spend that money for the soft service and may adopt a "Pay for it when we can afford it" attitude, which would deprive the entire municipality, all the citizens, new and existing residents, of a soft service. A soft service, whether it's a soccer pitch, a library or whatever, does contribute to the quality of life in that particular municipality.
Again, if the process is followed properly, there should be that balance between new growth and existing growth. It's there now. The protection and safeguard has been built in, and at the end of the day, the Ontario Municipal Board, an independent body, is there to adjudicate. Everybody in the development industry is familiar with the OMB; so are municipalities. We know the rules of the game. We know what we can or cannot get away with.
The next point about hard services: It's interesting that Mr Leach backed off on the 10% for hard services, because in our view that would have been much more serious. We're talking much more money. When you talk about hard services and soft services, even with a 10% reduction, in this day and age of grinding out every dollar, of spending it wisely, from my experience municipal council would have been very reluctant to put out money for hard services for new development. We've seen that in Mississauga. I don't think it was a flair for theatrics; I think it was just as a matter of necessity.
The taxpayer, and there is only one taxpayer, may be potentially saddled with large costs depending on whose numbers you believe with the announcements during the mega-week, if there is this billion-dollar shortfall. But more importantly, Madam Chair -- and I understand these are AMO's numbers -- is the approximately $550 million that will be transferred. Maybe it's less now because the hard service reduction is eliminated. It will be transferred for the first time from the development industry to the taxpayer. This is a first for this province. So now we are saddling the taxpayer with something the taxpayers never had before, and that is subsidizing new growth expenses or costs. That is something we submit is very significant and very worrisome for our taxpayers.
The city of Niagara Falls has had a zero-percent-increase budget for six consecutive years. In fact, in almost every budget there was a small decrease. In Niagara Falls, and we're speaking only for Niagara Falls, there is an expectation from the taxpayers that there will not be an increase. We've had to change. We've had to do business differently. If the taxpayers are told, and they will be told, that their tax dollars will subsidize new growth, costs that we can as objectively as possible point to new development, there will be a revolution. Taxpayers are not in the business of subsidizing new development. All the arguments that you'll hear -- it's common knowledge now that the development industry is not committed to passing on any savings to the homeowner as a result of this bill. That we understand from reading the Toronto Star.
Interjection: That's okay. They read the Toronto Sun.
Mrs Barbara Fisher (Bruce): Gospel. Here we go.
Mr Kallio: I thought I was doing so well.
Mr Gilles Pouliot (Lake Nipigon): Stuck with the Toronto Sun.
Mr Kallio: The housing industry, to a large part, is governed by the market. In the late 1980s, when I lived in the GTA, housing prices were going up $10,000 a month. There was no concern from the development industry or the building industry about the poor homeowner who couldn't afford it. If you bought your house in the mid-1980s, you made a handsome profit if you sold it by 1990. That was a fact of life. If the purpose of this bill is to try to get new homeowners into the housing market, we submit this isn't the way to do it.
It's estimated roughly that the city of Niagara Falls would lose approximately $300,000 per year if these costs are now shifted to the city's tax base. Obviously, that's less with the 10% elimination. The city of Niagara Falls is very close to its various industries as well as to the taxpayer. There's a dialogue between the development industry and the city. The proof of that is that the development industry had concerns. We sat down with them in the early 1990s and we resolved their concerns. I think they initially appealed to the OMB and they withdrew their appeal, so our bylaw did not have to go through an OMB hearing.
In 1995, and this was in response to the local building industry and to assist new home purchasers, the city of Niagara Falls implemented its housing start rebate program and set aside $200,000. At the end of my brief there's a copy of the front page of that. I phoned around to my colleagues and no one was doing it; we had to devise our own ground rules. We had $200,000 of the taxpayers' money we had to give to new home buyers. Seventy-five people out of 100 possible qualified purchasers took advantage of that and the city spent taxpayers' dollars of $150,000 to get the building industry back on its feet.
The politicians would have been accountable at the polls for this. They took this risk and no one lost his or her seat as a result of that, the best we can determine; only one incumbent lost his seat, probably for another reason. The point is that there was a local problem, a local concern by the building industry. The building industry approached the local politicians. The local politicians came up with a housing rebate program; $200,000 is not an insignificant amount for the city of Niagara Falls.
As a result, 75 new homeowners came to the city of Niagara Falls. There were no threats, no coercion, no legal action. The city did it in response to what it perceived to be a need. We're also suggesting, very respectfully, likewise with this bill: Don't tamper with something that's working relatively well. There has to be the local flexibility, the local initiative to take care of concerns.
This housing rebate program isn't something theoretical. It was cold hard cash. It worked well. It was very successful. The builders were very happy. The new home purchasers were very happy.
I have another source: The Niagara Falls Review as well.
The development charge on a single-family home in the city of Niagara Falls is $3,451. It's probably the lowest of any development charge, if you are to compare to a southern tier municipality in the GTA. If the city of Vaughan -- there's another article -- I guess both regional and local development charges are up to $18,000 or $19,000. Even with the regional development charge, which is about $1,900 added to our $3,400, we are so low. To now say across the province that you have to deduct 30% cost of soft services would hurt this city.
What we're suggesting instead is that rather than talk about a reduction of costs of services -- the costs are relatively the same in Toronto as they are in Niagara Falls; maybe some variation in the labour rates. The fact of the matter is that if we'd been very reasonable and responsible in determining what our development charges are and if the development industry says other municipalities haven't, we submit it's unfair now to penalize the good municipalities, if you will, with this approach.
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What we're recommending is that rather than a 30% reduction of the cost of soft services, if there is to be a reduction there be a 30% reduction on the development charge itself. We submit this would be fair because each municipality has had to go through the exercise, has had to have possibly a trial by fire if its numbers were wrong, and the development industry is very vigilant on that. So if there is to be any reduction, if there is to be this co-payment, we submit it's fair and has a local flexibility if you were to reduce the approved development charge now, as opposed to the reduction in the cost of the services, because that would penalize municipalities such as the city which has kept its development charges low.
Those are my submissions. I thank you for the opportunity to present them. Alderman Norm Puttick from the city council is here and if there is time left over he has asked if he could address the committee.
The Chair: Perhaps the time to do that would be right now, before our questions.
Mr Norm Puttick: I'm delighted to hear that the government --
The Chair: I should let you know that there are nine minutes remaining in the presentation, if you want to leave time for questions.
Mr Puttick: I'll take about a minute and a half. Mr Kallio and the staff prepared this brief. I just want to let you know two things: I sit on the large urban committee of AMO. I also sit on the social services of AMO. I've been an alderman for 28 years and I have never had anything that kept me awake politically -- I'm so frustrated with this system and the way this government operates. I ran in 1990 with Mike Harris. I'm retired for seven years. I sit on the seniors' board in our area and the subject that comes up all the time is, "What is this government doing?"
In regard to development charges, and I've got to say this, we all feel it's just a political payback to the developers because there's no way of getting this money back to the purchaser. What should happen is, if you were going ahead with these development charges, let the municipalities receive the 100% of the development charges as they are now in their separate municipalities, and at the time of the building permit let the municipality rebate that portion to the home buyer so you're sure that it's going, as you say, to develop jobs.
Let me just end on this: One of the biggest problems we have in our area -- we just received a communication yesterday from our MPP who has left on holidays -- is communication. We have asked his position on this and his position is: He agrees with the government. The MPPs agree with the government about what goes on in Toronto, but that's another matter. There's a lack of the communication we had with previous governments.
When they did anything, they talked to our senior staff. If it was important, they talked to fellows like me who have been around 28 years. But what seems to be happening, and I'm speaking politically now, is people get elected and they go along with the party line and they say, "What does that little grey-haired guy down there know about it?"
I'll tell you I'm going to sleep well tonight. I'm retired. I'm very active. I'm very intense. I know politics. I know how it works and you can go back and rest assured that I'll drop a personal note to Mr Leach for backing down on this because this was the worst piece of legislation. I write a weekly column in a paper in the city and I had written two articles and ended up that this is nothing but a payback and I'm glad you withdrew from it.
Mr Ernie Hardeman (Oxford): Thank you very much for the presentation. First of all, I just want to clarify that the cost of the studies is in fact recoverable through the development charges bylaw. The only thing that's not recoverable is the cost of appeals. If someone appeals it, you have to take that bylaw to the appeal and it would not be recoverable.
In your presentation, you talked of doing studies for the new bylaw and obviously the studies have to be done for the old bylaw too because there was a requirement that it must be done every five years. That's not necessarily an added cost since it has to be redone any way.
Mr Kallio: Excuse me, sir.
Mr Hardeman: If I could, I want to focus on the issue of accountability. I think we all recognize the price of development charges is in the price of a house, whether the savings are passed through or whether they're not. I think everyone would accept that at present a new home buyer pays for the development charges that are in the price of that house.
I have some concern that the municipalities could make the decision of how much they shall be based on -- in fact they're not accountable to the people who are going to pay that because they're not taxpayers yet and they could be very accountable.
Going to your development charges, you suggested that you set a rate. You then decided the development industry didn't like that rate so you negotiated it down to where both sides were happy. I would just like to know if in that process you lowered the level of service or whether you were too high to start with and it was the developers who forced the issue down on behalf of the new home buyers.
Mr Kallio: If I could deal with that point first, if you've ever seen these economists' or consultants' reports, it's not a science, it's not precise, so to speak; there's some opinion, some conjecture. It's like a land appraisal: one appraiser says X, the other says Y. Neither is right or wrong, but you have to test their methodology, you have to test their variables, that sort of thing.
It's not that our development charge was too high or too low -- the development industry probably wouldn't be happy unless it was a dollar -- it was the give and take. They have to look. They get to see the studies, we get to see their studies, that sort of thing, then you have to make a decision. Are we reasonable? Are we within the ballpark? It's like anything else; it's like litigation. You don't know what the court's going to do. That's why most lawsuits are settled. It's always the big grey area.
If I could deal with your first point, every five years you have to do these studies. My point was that we are doing these studies. The safeguards are there to further tinker with that. It doesn't make any sense. That was my point, to now have this 30% after all is done and it's a straight subsidy to the development industry.
Mr John Gerretsen (Kingston and The Islands): First, let me congratulate you on the housing start rebate program. I think it's a tremendously innovative municipal program and obviously it's been very well received in your area.
What I would like your comment on is what I perceive to be a great inconsistency. Last week the government came out with much fanfare with the notion that it's going to give a new Municipal Act in which municipalities will be able to do all those things that they should as a natural person be able to do, and a lot of the old methods that will prevent them from doing that are going to be done away with. Yet to me that seems totally inconsistent with telling municipalities in this Development Charges Act what they can or cannot negotiate with the developers in their particular area and depending upon their particular circumstance.
Do you see any inconsistency there in those two positions? Do you have any further comments on it?
Mr Kallio: Primarily in southern Ontario where the development occurs it's through lots of years of experience. People like Mr Iorfida who has worked in the development industry for over 30 years know what the cost is for a length of pipe; he can tell you what a sewer costs, a storm sewer, whatever. These are hard figures. A municipality can work through these things.
The development industry isn't happy with any development charge and that's a perfectly valid point of view, I submit. They want the least amount of charges and they want the most amount of profit and that's fine, but there has to be this balance. I haven't seen this new act; I've heard about this natural person act.
There are things in the Municipal Act that do not make sense; there are some that do make sense. But with respect to the development industry, we don't want to go on and on. The fact of the matter is there has to be a balance there. To take something that seems to be in balance and add another component, a significant one, will throw it out of whack, will cause it to wobble, and that's not going to help the development industry because municipalities have ways of coping.
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Whether there's an inconsistency or not, I don't know, but the fact of the matter is that we believe it's working well. There are sufficient safeguards. You don't have to take our word for it that we say it's working well; there are sufficient safeguards. The OMB is no friend of the municipality or the developer; they're a dispassionate third body. They'll look at the numbers. They have a lot of experience dealing with consultants and the numbers. They'll look at that. Either we're in the ballpark or we're not and we're quite prepared to be put to that test.
Mr Pouliot: Norm, it's a renewed pleasure indeed. We consulted when we had the opportunity and we certainly keep a very good memory of our exchange. Mind you, this time, courtesy of some electorate, we find ourselves being the third party and my job is a lot easier. So it's a renewed pleasure.
The rebate program is due to expire next week, on April 1, is it not?
Mr Kallio: No, it was in 1995. It expired in 1996.
Mr Pouliot: It has expired. Given this legislation and also given what is to be expected -- you've mentioned a mega-week -- candidly, would you be able to offer the same program under conditions that are about to happen?
Mr Kallio: It's a matter of dollars and cents. Obviously, I don't speak for city council, but city council has its eye very close to the bottom line and we are driven by what the taxpayer can afford, and that's not a fiction.
Mr Pouliot: In your presentation you've mentioned with some pride -- justifiably so -- that the city went for six consecutive years without a tax increase and in some cases a small decrease. I will get political, if I may: With all the downloading -- because that's what it is; there's nothing which is revenue-neutral here; let's make no mistake about it -- the Premier has mentioned that by the year 2000 municipalities should be able to enact a 10% decrease in municipal taxes. The people you represent, Norm, are very much aware of what the Premier has said and they will be expecting a 10% decrease in general purpose on their tax bill.
As you look at your crystal ball, will you will be able to deliver, to satisfy, to fill those expectations?
Mr Puttick: Could I just take 10 seconds? I'm glad this question came up. The city of Niagara Falls just completed its sixth year without a tax increase, close to $2 million out of senior payroll. We were the first municipality not to have a deputy fire chief. Every meeting I went to -- AMO, Good Roads -- asked, "How did you do it?" and so on. Number one, because we have good staff; they did that.
But talking of downloading, the city of Niagara Falls and the region have a signed contract by the provincial government to rebuild a $16-million bridge at Thorold Stone Road over the Queen Elizabeth highway. All the property was purchased for the cloverleafs, developers went ahead and built subdivisions and stores, and guess what? Mike Harris said, "No, we're not going to pay for it."
Subsequently, and I'm coming to a point here, the finance minister of Canada, Paul Martin, said: "There will be no infrastructure money. We don't have it." Now they have an infrastructure program and what I'm doing locally and trying to alert people to -- I'm going to be at a meeting at the region this afternoon -- is: "Guess what? The provincial government is going to come down and say: `We're going to build your bridge. You pay one third, the province pays one third and so on.'" What I'm saying is, you're downloading, downloading, downloading and penalizing our municipality which had been efficient long before Mr Harris came on the scene.
I've done research on this. I've talked to a lot of people. I've talked to the people at AMO who are good staff, do all the work for your chairman, Mr Mundell, and there's one conclusion, and we were told this Friday. You have no plan on anything you do, but there is a secondary plan with $2.5 billion to throw out if plan 1 doesn't go. I say that to you very, very constructively because, as an elected person, all these announcements come out and nobody has a plan. If they don't honour the $16-million signed pledge to build a bridge, how can we believe the government on anything else they do?
I know I'm a little bit off the subject. I know I'm a little frustrated as an elected person. But start listening to the people who are there, not the local politicians. Listen to our staff who have had six consecutive no tax increases. We have a casino, we're up 117% in building permits and you people sit down there and don't want to talk to us. We can show you how to run a government.
The Chair: Thank you very much with that. We appreciate your taking the time this morning to come before us.
Mr Gerretsen: I think we should hear more from this gentleman. It makes a lot of sense. Maybe something will get through.
REGIONAL MUNICIPALITY OF NIAGARA
The Chair: We now welcome the delegation from the region of Niagara, if you could come forward and introduce yourselves. Please begin.
Mrs Jill Hildreth: I am Jill Hildreth, and I am a regional councillor from the town of Lincoln in the regional municipality of Niagara and I am also chairman of the Niagara regional development charges committee. I have with me this morning Mr Shafee Bacchus, who is the assistant director of finance and my very best right-hand man. He's the gentleman with all the detailed knowledge. I'd just like to give you an overview of some problems that we have in Niagara, and then I am going to throw the ball to Mr Bacchus and he will continue to carry it.
I am very pleased to have the opportunity to address you this morning on behalf of the development charges committee of the council of regional Niagara. Niagara region is a very diverse area of Ontario and quite unique in its infrastructure needs in that it is surrounded on three sides by water and has to cope with the geographic challenges imposed upon it by the Niagara Escarpment. As a result of those facts we are faced with a total of 15 waste water treatment systems in Niagara and seven water treatment systems which include their accompanying pumping stations and miles of pipe. This represents only a portion of those areas where development charges will need to be spent.
With this in mind, I would like to assure you that we as a council have always attempted to meet the challenges of growth-related costs in a fair and equitable manner, not only for the developers involved, but also by attempting to reduce the costs to the existing residents and the future taxpayers by having those developers pay their fair share.
This has been quite an exercise, necessitating not only development charges studies in order to clearly delineate the growth-related components of our proposed infrastructure, but also included consultations with those most greatly affected by our decisions, members of the development industry themselves.
We have just recently received our updated development charges study, prepared for us by Hamson Consulting Ltd of Toronto and will be presenting those results to regional council within the next few weeks. We will also be recommending to council that members of the development community be invited to participate in our deliberations on the new proposed charges as they had been asked to previously.
Niagara is a most beautiful area of Ontario but has throughout the last decade suffered greatly from a stagnant economy as well as plant closures. With this as a background, we have always attempted to keep our development charges very reasonable in order to try to encourage development here.
We have never imposed development charges on industry or commerce in order to encourage them to locate in Niagara if possible. We are very pleased that the Premier has decided to withdraw the 10% charge that we would have to shoulder on the backs of our taxpayers for the hard services, because when you're talking development charges in Niagara for the region, we are talking hard services pretty well 100%.
I will now leave it to our very capable Mr Shafee Bacchus to present to you the detailed concerns of regional Niagara concerning Bill 98.
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Mr Shafee Bacchus: Madam Chair and members of the committee, we are submitting this brief on behalf of the regional municipality of Niagara. As we understand, in 1996 Bill 98 was introduced in the Ontario Legislature. The bill is intended to replace the existing Development Charges Act of Ontario and the regulations thereunder.
We have reviewed the bill and are concerned that certain proposals will severely impact on the current financial status and infrastructure programs of the region of Niagara and therefore would suggest that in those instances the proposal to change the existing act be reconsidered.
The minister's announcement yesterday kind of knocked some of the wind out of our sails in the first part of our brief, but I'll say them anyway, just to re-emphasize our concern that we don't agree with the copayment clauses that are included in the bill. If you will bear with me, I will read them off anyway.
We acknowledge the broad goals of the province with the introduction of this bill and we understand that they are to improve fairness, reduce obstacles to growth and development, change incentive structure, reduce charges, continue the ability to pay for infrastructure and increase municipal accountability.
With few exceptions, these goals are no different from those enunciated when the existing Development Charges Act came into being in 1989. The act was the vehicle to bring about change to an environment which was confusing to both municipalities and developers alike.
The Development Charges Act of 1989 was not perfect but it introduced standard practices to the municipalities regarding the extent of information compiled and disclosed and how the charges are to be developed, kept and expended.
Today, as always, municipalities are faced with the challenge of providing services in a consistent manner to new development without impacting the existing residences and thus the goal of fairness. This challenge has meant that most municipalities, including Niagara, are unable to adopt a full-cost recovery approach for any project related to growth. In Niagara, development charges represent approximately 20% of the cost of infrastructure related to growth. In other words, 80% of the costs related to growth at the regional level is borne by the existing taxpayers or transferred to the existing taxpayers.
Bill 98 as proposed seeks to guarantee this inability with the monetary copayments of 10% and 30%. In other words, it guarantees that those taxpayers who are satisfied with their existing services must subsidize through increased taxes and user rates new infrastructure because of the growth and there is no evidence that the development industry will pass on this reduction on the new house buyers, nor does Bill 98 attempt to ensure this.
In a recent study conducted for the region, new growth-related infrastructure costs over the next 10 years, 1996 to 2007, will amount to approximately $131.6 million. Assuming the copayments as proposed, this would mean that approximately $13.8 million will have to be absorbed in Niagara's general tax levy and user charges because of the proposed changes. In our view, this is unreasonable and at best an arbitrary decision. It is critical that the new costs of growth are paid for in a fair and reasonable manner by the development which causes the growth and not by the existing residents.
The decision to fund must rest with the municipality and municipalities must be allowed to fund growth requirements from whatever source and in whatever amounts, limited only by those services prescribed under the act. This is essential for good financial planning and ensures the needed services are in place as required. Similarly, it is fundamental to the recovery of growth-related costs that all of the costs be identified and used in calculating a development charge.
The proposal under section 5(6) and 5(1)7 of Bill 98 would arbitrarily reduce these costs and pass them through to existing taxpayers. Reducing these costs by 10% and 30% before the development charge can be calculated moves away from the principle of fairness and equity, in particular for hard services which represent the highest levels of expenditures for Niagara and other municipalities around Ontario. We have similar concerns with sections 36 and 64, which propose to limit the amounts to be spent from development charge reserves to the 10% and 30% copayments. We would emphasize that new growth must continue to pay for itself and should not be compromised with cofunding as proposed in Bill 98.
We would therefore propose that the provisions in section 5(6) and 5(1)7 be removed so that there are no reductions to the identified growth-related costs prior to and after calculating the necessary development charges. At this point, we acknowledge that the minister has suggested that the 10% copayment would be removed and we are pleased with that announcement.
We are also concerned with the proposal in section 5(1)4 whereby the need for increased service to development must be reduced by uncommitted excess capacity. Municipalities typically do not construct only to meet existing needs. Sensible planning requires the anticipation of future growth to ensure satisfactory accommodation of those who may come in the future. It does so by upfronting those costs with the intention that future growth which makes use of that oversizing will repay the existing taxpayers through development charges. The proposal in section 5(1)4 grants a free ride and is not consistent with good public works, financial or planning policies.
It is therefore proposed that section 5(1)4 be removed and instead a provision be made to allow for the inclusion of all oversized costs in the calculation of development charges.
Section 5(1)3 ignores the fact that the need for service levels in some areas of service -- water, waste water and transportation -- are dictated to a large extent by the province and may exclude increases which exceed the previous 10-year average. Therefore, to require 10-year average service levels as the criterion for determining costs is unreasonable in some cases when the need is mandated and outside of the control of the municipality. As well, if the 10-year average is less than what is required for growth today, this effectively removes 100% cost recovery in calculating the development charge. It is proposed that the service level be tied to the need of the proposed developments consistent with provincial and municipal policies.
We are pleased that studies connected with any of the development charge calculations can be included as part of the capital costs, and this is as it should be. That is included in section 5(3)5. However, we question the necessity to require an examination of the "long-term operating costs for capital infrastructure required for the service" as proposed under 10(2)(c). Inasmuch as growth-related capital costs are easily identified, many of these would be serviced through existing plants. Therefore, it would be arbitrary at best to attempt to quantify the operating cost impact in such cases. This only adds to the costs of calculating development charges and, subsequently, given 5(3)5, the charge itself. It's surprising that the development industry doesn't see anything wrong with this because now we're adding to the charge with this inclusion of an operating study which can be included in calculating the cost of development charges.
It is therefore proposed that section 10(4) be amended to remove the requirement for a background study on operating costs.
We have attached to this brief an executive summary of points made by the regional treasurers of Ontario and, as I understand, this either has been submitted to the minister or will be submitted to the minister in the very near future. We're in complete support of those points. I am not entirely prepared to discuss all of the points raised in that executive summary, but I'll attempt to if there's a need to.
Niagara will not be affected in the same manner in all respects as suggested in the executive summary from the regional treasurers. For example, we don't support hospitals at the regional government level from our financial plan. However, we can appreciate the impact Bill 98 will have on those regions where these services are concerned and therefore are in full support of the proposed amendments.
In conclusion, we respectfully suggest that your committee review our concerns and recommend the necessary changes to the bill prior to its enactment.
I'd like to thank you for this opportunity and for giving the region of Niagara an opportunity to present this brief.
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The Chair: Thank you very much. Are you ready for questions and answers? We'll begin with the Liberal caucus and you'll have about four and a half minutes for questions and answers both.
Mr Mario Sergio (Yorkview): Thank you for coming down and making a presentation to our committee today. We have heard practically the same things since we started last Monday hearing deputations. We had the developer side and we have the government side, such as yourself. Practically, I could say you are repeating what other members have been saying, including yesterday, for example, in the city of Ottawa.
The bill as it is presented wants to have legislation which imposes on municipalities all over Ontario how to run their business practically and we have been hearing that the municipalities should have that flexibility to run their business according to their needs. This is what you have been saying, this is what I believe the previous presenter was saying, and we are saying if the municipalities have been doing such a good job, why do we have to change so drastically the legislation as it is now?
On Monday the minister himself said that the price of homes should come down by $5,000. With what you have said with respect to subsection 5(6) and paragraph 5(1)7, how would you rebate that to a homeowner? How could we pass along that reduction?
Mr Bacchus: The region of Niagara doesn't have, as the previous speaker has said, a rebate program in development charges. We have one of the lowest development charges among regions, and in fact the region's charge is lower than all of the municipalities' charges in and around Niagara. I'll ask the council representative to address the question of a rebate program, but from my experience at the region we don't perceive a rebate program in the future for home buyers, because our charge is so low for one thing. We're only recovering about 20% of our growth-related costs.
Mr Sergio: I don't mean necessarily initiating some rebate programs. I mean with respect to Bill 98, according to the minister, if the charges were to be reduced or eliminated, the price of a house should come down by $5,000. We don't agree with that. But if that were the case, how can you as a municipality pass on to that prospective new home buyer that reduction of $5,000, $7,000, $3,000, whatever?
Mr Bacchus: I don't think it's up to the municipality to pass that on. It's up to the developer to pass that on to reduce the prices. The market forces will determine that. I don't see how the region will do that.
Mr Sergio: Hazel McCallion says unless he legislates the price of homes, you can do it.
Another question from my associate here.
Mr Gerretsen: Just to follow up, I believe you were here for the earlier presentation where it was suggested that if we want to make sure that some of this money ends up back in the pockets of the home buyers, why don't we just have the old system stay in place and why doesn't the government just legislate that a municipality has to turn back 25% or 30% of the actual money that was paid by the developer for development charges? There could be legislation that once the home buyer is in or once the house is being bought, that could be given directly to the buyer. What do you make of that kind of suggestion? I think it's an intriguing one.
Mrs Hildreth: I would agree with you, it's intriguing. At the regional level we don't even collect the development charges ourselves. The municipalities do that and, on occasion, they slip up and we have some quite interesting meetings.
Mr Gerretsen: You're not a local council, I take it?
Mrs Hildreth: No, we're not local. I really do believe, though, that giving a rebate on a charge that is so minute in its impact doesn't benefit anyone.
The Chair: We'll move to the Liberal caucus -- sorry, the NDP caucus. I apologize.
Mr Pouliot: The point is well taken, Chair.
Mr Sergio: He hasn't joined us yet.
Mr Pouliot: My colleague Mr Sergio is quite right vis-à-vis Bill 98. The presenters have become "somewhat predictable" by virtue of whom they represent. We have heard a lot of opposition. Some were bold and went as far as to say it was la payola, that golf buddies had to be rewarded, that you treat your friends a little better than you treat others, that when all is said and done, you are seduced by the massage and the minister decrees your number has come up: "Congratulations, you've won the lottery."
Another sentiment, and I need your help, that has emerged is the following. Many presenters do not believe that the savings will be passed along to the consumer. In fact, few presenters believe that all the savings would be passed along to the consumer. They believe that the developer -- and they go as far as imputing motives. They have immunity here.
I have a question: the downloading, the transfer of who pays for what; not who does what but who pays for what. It's going to cost the Niagara region, I think I read somewhere, about $73 million, and then you add these costs to it, and then you are expected to enact a 10% decrease in property taxes by the year 2000. Can you help me? Where are you going to take the money?
Mrs Hildreth: I don't think that solution is even rational. It's not going to happen. I can't see it happening.
Mr Pouliot: I share your sentiment. I too have searched long and hard to find the costs associated with what's coming down the pipe. One day I hear it's $900 million in a contingency fund; two weeks after I hear now it's 2.3 or 2.5. I represent a riding that goes all the way to Hudson Bay. We don't even know the cost of policing, who is going to pick up the 50% of the drugs for the welfare recipients etc. Those people, that lot there, the manner of humanity that the government has attracted, would like us to believe we're going to get a 10% decrease in our property taxes because this is all revenue-neutral. Well, it's not revenue-neutral. They're gunning for $3 billion between that and education, and I want to wish you well.
Mrs Hildreth: Sir, I feel that the government is well intentioned, but they seem to have blinders on one fact: reducing the debt. I think most members and most citizens of Ontario would agree with that. By doing so, they're dropping boulders into the pond that is Ontario. I think they're forgetting that when you drop boulders into a pond, waves are created. I think that's the problem we're faced with: What's going to happen when those waves hit the boundaries of the pond?
Mr Hardeman: Thank you very much for your presentation. Going to the development charges in the region of Niagara, I think in your presentation and in previous presentations you said it was $1,700 per lot.
Mr Bacchus: Some $1,900 for single family.
Mr Hardeman: So $1,900 per lot, and your study shows you could charge considerably more.
Mr Bacchus: At the time the present rate was suggested to council, our study showed that we should have been at around $10,000 for a single family. It was a decision -- I think Mr Sheehan was on our public advisory committee as well. We had an excellent communication strategy developed and by listening to the developers as well as the community at large, we reduced that charge to substantially less.
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Mr Hardeman: Is it possible to suggest, then, or appropriate to suggest that the existing taxpayers are picking up the difference?
Mr Bacchus: Yes, 80%.
Mr Hardeman: So your existing taxpayers are presently picking up 80% of the cost of that growth.
Mr Bacchus: Growth-related, yes.
Mr Hardeman: Using that assumption, under the new proposal it would become quite simple for Niagara to just increase the 19% to 22% to make up what the 30% is, and then the existing taxpayers would pay exactly the same as they presently are paying, which of course is based on the decision of your local councillors. So there would be no impact on the taxpayers, either the home buyers or the existing taxpayers.
Mr Bacchus: For example, if the copayment charges remain in the bill, the $13 million which we estimate would have to be transferred to or absorbed by the existing taxpayers which is not being done right now, I imagine that would represent, to get your question earlier, about a 14% increase in the tax levy.
Mr Hardeman: I want to get it perfectly clear in my mind. You presently have the existing taxpayers paying 80% of the cost to service new development. The proposal before us suggests that that should be on hard services, and the proposal is 10%; the minister has said he's going to remove that 10% requirement, but on the other services it would be 30%. That's 50% less than the taxpayers in Niagara are presently being asked to pick up. So where is your concern that --
Mrs Hildreth: But, sir, that is a local decision to do that, it's not a legislated decision. That's a local decision.
Mr Hardeman: But the local decision between the two pieces of legislation would be just to change the numbers and your taxpayers would be impacted in exactly the same manner as they presently are.
Mr Bacchus: No, I don't think they'll be impacted in the same manner. Right now, as I mentioned, we're picking up 80%. Under the bill we're being asked to pick up an additional amount over and above what we are already transferring to them.
Mr Hardeman: Using that percentage, would you speak positively to a suggestion that the 80% be used as part of the copayment, that in municipalities where they charge less than what the studies showed, that would be the payment as opposed to having to put cash into the fund?
Mr Bacchus: I'm not sure of your question. Maybe you can rephrase it.
Mr Hardeman: Not using the 80%, say it was 30% that the taxpayer was presently picking up and 70% was actually in the development charge. If the legislation allowed that instead of having to put 30% cash in, you could use that 30% difference between what was allowed and what you were charging as the copayment, would that solve your concerns?
Mr Bacchus: It would allay it to some extent, but not completely.
The Chair: We'll have to stop at that point. Thank you very much for taking the time to come before us with your suggestions. They're appreciated.
METRONTARIO GROUP
The Chair: We'd now like to hear from the representative from Metrontario, Mr Mondell. Welcome.
Mr Paul Mondell: Thank you, Madam Chair, members of the committee. Good morning. My name is Paul Mondell. I am here on behalf of the Metrontario Group. The Metrontario Group is a group of privately owned companies that I'm proud to say celebrated their 50th anniversary in 1996. During that time we have been developing residential communities and building homes throughout the greater Toronto area. We currently have projects spanning from Burlington through to Oshawa, as well as some significant holdings in the United States.
Thank you for the opportunity to address you this morning and share some of my thoughts with you on an issue that is critical to our company and to our industry.
Let me first say that we believe growth should pay for itself. The question I keep asking is, why are we going through this complicated process? To quote Mr Hardeman from a few weeks ago: "Something went wrong. Growth is not just paying for growth but is paying for much more than its fair share." The Development Charges Act was intended to cover the costs of growth-related services that are needed. It is our perception that in addition to the services that are needed, many municipalities are charging for a share of some non-growth services and a share of services that are not needed.
That is why we have seen many development charges that have doubled and tripled since the Development Charges Act was first introduced. The Development Charges Act was supposed to provide greater consistency and accountability in the way municipalities used development charge dollars. The effect has been quite different.
The bill that's before you is an attempt by this government not only to recognize the importance of our industry and the economic benefits associated with having a strong and healthy development and housing industry, but also a return to a balance between the needs of a municipality and the need for growth; the need to create affordable housing and the need to provide new services; the need to remove barriers to economic growth and job creation.
The proposed legislation is not about developers and municipalities winning and losing. That, unfortunately, in my opinion has been how this has been portrayed. It's about returning to the original principles of fairness and accountability. We have to stop building gold-plated monuments and return to building facilities that people truly need.
Let me deal with a couple of items that I think are fundamental, and these are the issues that Bill 98 addresses. The first is the control of the level of service and the second is public accountability.
In my submission, the level of service is controlled in three ways:
(1) What municipalities can include in their charge. The new legislation reduces the scope of services for which municipalities may impose development charges, including such things as art galleries, performing arts centres, tourism facilities, city halls and excessive parkland acquisition.
(2) Applying an average level of service test over the previous 10 years versus the former peak level of service test, or cherry-picking, as I would refer to it.
(3) Copayment. The new legislation will still give municipalities the capability and the flexibility to recover costs on a wide variety of services and facilities needed by new residents and new businesses.
We believe that if a municipality can pass on 100% of the cost of soft services, there is no incentive for fiscal responsibility. Unfortunately, we have seen far too many abuses of the present system. It is far too easy to justify a project to the existing taxpayer as a development-charges-funded project if there are no tax dollars going to support that project. Our industry supports copayment as fundamental to the spirit of Bill 98. There is, in my opinion, no other mechanism that will require municipalities to cut their costs, reduce excessive level of service standards and examine alternative financing options. We believe these three requirements will effectively control the level of service a municipality is willing to impose on new growth.
The second point is accountability. The new legislation provides for greater transparency, more detailed accounting of development charges revenues and expenditures and requires municipalities to analyse the long-term capital and operating costs associated with facilities intended to be financed from development charges.
One point that I feel is very important here is that this is going to benefit not only future taxpayers -- because this is what a lot of this is about, people who don't yet have a vote in these municipalities -- but this is also going to benefit existing taxpayers.
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Municipalities will be required to examine the future costs associated with new facilities, not just the initial capital expenditures. Again, it was far too easy for municipalities to simply say, "These are capital dollars that are being paid for by development charges." There was no indication or any examination of what the long-term operating and maintenance costs of these facilities were going to be, and everybody was going to be saddled with those costs, not just the future taxpayer. I would submit to you that this will undoubtedly provide the sober second thought that is needed before any money is spent and projects are advanced.
Why are these changes necessary? While the existing legislation was full of good intentions, it did not provide the accountability that was expected. I have, unfortunately, some very bitter experience in this matter.
Development charges have continued to escalate while most other costs have been reduced since 1991. I can tell you that most of the costs I'm associated with, and land values, have fallen by as much as 30% to 40%, while in most municipalities development charges have risen in the same period by 10% or more.
Municipalities have proposed development charges for non-residential uses in excess of what the land is worth. Projects, and I have one of them, have been put on hold because the development charges and servicing costs are more than the land is worth.
We've heard a lot of discussion this morning about rebates and whether cost savings are going to be passed down to the homeowner. I'd like to suggest to you that I've got a situation where I can't bring my land to the market. There's no money in it. When you've got, in some municipalities, development charges close to 40% of the land value and then you add on to that your servicing cost, I'm afraid those projects aren't going to go ahead.
I would suggest to you that the projects that could be brought to the market and should be brought to the market will do more to keep prices down than talking about rebates, because competition creates that environment. Some of these examples I've given you and some of the development charges bylaws are not, I would suggest, how you encourage economic growth and prosperity in Ontario.
I would like to briefly point out one of the problems in the legislation. Notwithstanding the many positive changes contained in the new legislation, there is a concern by our industry specifically with respect to transit. The removal of provincial funding to transit is going to place a huge financial burden on municipalities. If municipalities are allowed to pass on their increased costs to the development charge, the fear is that any savings realized by the changes in this legislation, including those I've already discussed, will be more than offset by the increase in transit. A special case can be made for transit, since it does serve the population as a whole and in many cases crosses municipal boundaries to provide a more cost-efficient service. We are suggesting that transit be funded from a combination of development charges, user fees and the tax base.
In conclusion, we would like to commend the government for the leadership they have shown in this important matter. We feel that Bill 98 provides the balance between the interests of the development industry and those of the municipalities. Municipalities will continue to provide the services that are needed in a cost-efficient way that is fair to everybody.
Thank you for the opportunity to address the committee this morning. I'd be glad to answer any questions.
Mr Pouliot: I thank you, Mr Mondell. You speak with conviction. I need to tap your expertise. I need your help. You have mentioned that development charges at times go beyond their intent, if you wish. Not only do they subsidize growth or pay for growth, but they go beyond. I took it that you were talking precisely about hardware and software, that development charges were used to go to a VAT or to a general fund of sorts, and then the council would dole out whatever they wish.
Let me give you an example and you tell me if I'm wrong. This is where I need your help, because I come from the premise that when I buy a house, I also buy a little bit of the museum, part of the library -- oh, yes, you've inspired me: transit. Your presentation, I trust, was very consistent, but then you were seduced by the lure; you threw in transit to sell the property and the true Mondell came out, and that's okay, that's fair game.
What about if some of the development charges are used to buy a grader? The grader is getting a little long so the municipality needs a new grader, $160,000 or $180,000 or whatever. Should they use the grader only for that portion that is being developed, only for that section, that subdivision, or would you think it would be wise to use the grader for as long as the roads will take it? Don't you think that is good management? What I am saying is that it's very difficult to differentiate between development services in a dedicated way and the soft services which are also a development charge, one could argue, because they make up the community. We're taking about location, location, location. I wouldn't buy a small house without trees, because I love trees. Most people do. I would prefer one with trees, so the cost of planting trees has to be incorporated in it, don't you think?
Mr Mondell: There are many questions there. Let me see if I can work my way through it.
With respect to the grader, I would suggest you don't need to buy the grader. You could probably lease it. It would be a lot cheaper.
Let's talk about museums and the softest of the soft services, as I like to call them. Let me use an example of a situation that I was involved in in a municipality in the GTA that had a very lovely performing arts centre, if I could use that example, rather than a museum; probably about 500 seats. When you looked at the projections in the background studies, and we did take a very close look at it, the facility was operating at far less than capacity. Certainly when a large-ticket item would come to town, it would likely sell out, but the vast majority of the days, that facility sat empty. The municipality suggested, though, that since their population was projected to double over the 10-year or 20-year period, therefore they needed twice as many seats in a facility that currently wasn't being utilized to begin with. We seriously questioned whether that facility was truly needed and should be a growth-related cost.
There are many examples I would give you that are related to growth. That one and your museum, I would suggest to you, are not, and for another reason as well. We're talking about affordability.
Let me give you another example of a community that is very well off, I would suggest, and has experienced a healthy growth rate over the last number of years. That's the town of Oakville, where I'm very active. I think most people would suggest that it's a very affluent community. In my latest project out there, 60% of the buyers who are buying houses are first-time home buyers, less than $200,000. Your museums, your performing arts centres, with all due respect, sir, are not helping create that affordability. I believe those people's first priority should be getting into the house and getting housed. Then let them, as a current taxpayer with a real vote, decide collectively whether that performing arts centre or whether that museum is adequate to their needs.
I would make the same suggestion on the non-residential side. I don't believe a business that wants to come into a community should be saddled with those kinds of costs if there is no needs/cost-benefit analysis they can then attribute.
I think those are very, very fundamental issues. I think this bill covers off some of those things. There are lots of other examples we can talk about. I believe recreation centres, parks and those types of things that have a direct relationship to a community and the way people live are much different than the examples I just gave you of performing arts centres and museums.
I'm not sure I answered your question, but I think municipalities looked at the development charges legislation and said, "This allows us to buy the new grader and it allows us to buy the new dozer and the new pickup truck." I don't believe a lot of it was necessary.
Mr Pouliot: So you feel that it was a levy and it was done at random and whatever the market will bear?
Mr Mondell: Absolutely.
Mr Doug Galt (Northumberland): Thank you for your presentation. It was a most interesting one. Having listened to you and listened to the ones previously and for the last two days coming from both sides, it sounds like maybe we're coming in the middle, and if that's the case, maybe we've hit it not too bad at all. You did suggest a problem, and we'd like to see that one addressed. Some of the municipalities have expressed some others. You also talked about 40% of the cost of land being a development charge, and that has to be a detriment to getting on with development.
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Yesterday one of the presenters indicated that for a long period of time they had been collecting development charges. Part of that was to build a bridge. Lo and behold, a few years later the bridge no longer appeared on the list of reasons for collecting development charges. I have a few names for collection of money under those pretences. Do you have any suggestions on how that might be prevented in the future and be a little more accountable and honest and upfront with those people buying those homes?
Mr Mondell: I believe you've hit on a very interesting issue. I think we've seen that in many cases, that suddenly projects where money was collected either under the old lot levy regime or development charges no longer appear. I'm not, I guess, as up on some of the technical issues in the new proposed legislation as I might be, but as I understand the proposed legislation, getting into more technical discussion, reserve funds are going to have to be created for specific items. If you're collecting money for recreation centres or for parks, those moneys will ultimately have to be spent on those items. You cannot take the money you collected from parks and spend it on roads. Unfortunately, part of the problem with the last legislation is that everything was a moving target.
I sat in a room at the beginning of an Ontario Municipal Board hearing and the chairman of the Ontario Municipal Board that was hearing this panel said, "Surely a municipality has the right to cook the books, because at the end of the day they have to go face the electorate." That was it. The legislation was out the window and we were dead ducks. That's what this legislation has to prevent. It's creating that accountability, that transparency. The municipalities can't just take the money and spend it where they want. If it's collected for a purpose, it has to be spent for that purpose.
Mr Galt: I hope the words you used weren't a quote.
Mr Mondell: It was a quote.
Mr Galt: That's most unfortunate. Thank you very much for your comments.
Mr Tom Froese (St Catharines-Brock): Doug stole my question, but just to reiterate what you said, I totally agree with your statement that some of these reserve funds should be set aside. In one development in my area there was a development of a parcel of land and they had to expand the lagoon and only half of it was developed at the time. That's some years ago. The developer went bankrupt and everything else. Now the next set is being developed -- this is after 15 or 20 years -- and now they're paying for the expansion of the lagoon service again. Who pays for it? It's the consumer, the people who built in that subdivision initially. They paid for the cost, and if the municipalities would have set aside $50,000 for this, that fund could be up somewhere around $500,000 already. It was spent somewhere else.
Dealing with the accountability factor, I guess your suggestion would be to set those funds aside in a reserve fund and then we could all feel that they're accountable and that we wouldn't be double-charged next time that same subdivision is being expanded.
In my former life, I financed developers. The argument saying that developers are going to make all this money I don't agree with, but I understand why people say that. I wish they would just sit in the developer's shoes and understand that when you're hit with a recession, you've got to hang on to this land, you've got to keep it. I've had some experience with that before.
You said before that development charges were increased by 10%. I guess I'm making a statement, but a small question here: Do you feel the services were increased by that 10%?
Mr Mondell: No. I think my reference with that figure is that most municipalities, or every bylaw that I was aware of, have the ability to index. I personally feel there was a problem with the way that was set up. There is going to be some attempt to change that in the new legislation. We were getting indexes that municipalities were using coming out of the United States that had no bearing on the real costs we were dealing with here. As a result, you saw on a semiannual basis many municipalities that continued to index. Some decided not to; some that were more aggressive decided to. So while we saw costs decreasing, and we heard earlier presentations about the line being held on taxes, many municipalities continued to index their lot levies even through periods of time when inflation was not at that rate. The indexes were flawed. That's not so much a municipality's fault, I would suggest, but those increases really came about as a result of indexing more than anything else.
Mr Gerretsen: Perhaps I should tell you that I've been involved both on the development side of things and on the municipal side of things from time to time over the last 20 to 25 years or so not at the same time. It always seemed to me that the much larger problem has been the speed with which development gets approved. That's a much greater concern of the industry than what the current lot levy may happen to be at any particular time.
You talked about fairness and accountability. I guess it's a little bit like beauty: It's in the eye of the beholder, it depends where you sit, as to whether or not a particular system is fair or accountable.
It always seemed to me that whenever developers came forward and started crying poor -- a municipality's finances are pretty well known: what the money is to be used for, what reserve funds are there etc. The moment you start asking the other way and saying, "All right, if you're really so badly off in these particular circumstances, then you show us your books," immediately there's a great reticence about that because it's private and blah, blah, blah. My point is that if you start talking about cost-benefit analysis on the one side, we have to look at it from the other side as well. Don't come crying poor to a municipality or to a committee of this Legislature if you are not prepared to open up your financial side of things as well. It always seems to me it's a one-way thing in that regard.
You at least, I'll grant you this much, have given us a couple of examples in a very indirect way as to how you felt that some of these development charges were being improperly used to finance art galleries, museums and city halls. We've heard about this off and on, both during the committee hearings and also before that, that this is going on on a regular basis throughout Ontario. Would you be prepared to list some of the municipalities that are actually abusing this right now? I know you're not willing to because you may want to develop there, but let's have some specific examples of where this has actually been abused.
Mr Mondell: I think you've probably heard from some of them in the previous few days. That's what's been amazing in my mind, some of the rhetoric you've heard from the municipalities.
I find your question -- I think it was a question -- very interesting. My company has been around for 50 years. We're developing land today that was bought in 1969. It was supposed to be five-year land. Unfortunately, I don't have the number of years of experience when the process did go quicker. My professional experience has been one of a very slow planning process.
The one way I have to answer is to look at you and say, look at the large development companies that we all knew and loved in the late 1980s that aren't around any more. I would suggest to you it's not because of the large profits they made that they packed up their bags and went home. They are no longer around because it's a very risky and a very capital-intensive business that we're in. I would suggest to you that with the increase in risk is an increase in reward. I can tell you right now, sir, that the rewards are in no way indicative of the risks that are being taken in this industry right now. The profits that are being made are very small. I can tell you that we sit around boardroom tables and try to figure out how we get that final house price down to $139,900 because someone's doing it in Mississauga. If I'm not competitive with the guy in Mississauga, I'm not going to sell in Oakville, and it has to be cheaper in Burlington. My costs are no different, though.
Mr Gerretsen: Yet you're willing to do something about the transit situation and you say, "Yes, there should be development charges for that." Well, in my municipality of Kingston, transit is not a big thing but quality of life is. So it may very well be that in my municipality, which doesn't have any development charges currently at all, I should tell you, the notion of having some of the charges paid into, for example, the Grand Theatre or the renovation of city hall or something like that is a lot more important to those people than whether or not money is being set aside for transit. Should that not be left up to an individual municipality, then, to work out with its local building industry what would be appropriate in situations like that? Why have provincial government regulations or legislation in that regard?
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Mr Mondell: Unfortunately, I think if the spirit of the existing act had been adhered to and municipalities had played in a fair and equitable way, we wouldn't be sitting here today. The spirit of the 1989 act, if it was intact today, would have solved all of the problems it was intended to solve. It didn't work. Unfortunately, while the municipality that you represent may take a view that is fair and equitable, there are many that don't. All you have to do, sir --
Mr Gerretsen: Why don't you list them? Do you want to list those?
Mr Mondell: All you have to do is drive along the QEW through many other municipalities and you'll see what's been built over the last five years. I will point out, if you would, on your way back to Toronto, as you're going through Grimsby, look at the water filtration plant, but before you get there, look at the old sewage treatment plant. As you're going through Oakville, look at the new sewage treatment plant just after Bronte Road. I'm not going to sit here and tell you those were built with development charge dollars -- I don't know -- but they weren't built with their own money, I can tell you that. Someone paid for them. I would suggest to you that the detail on some of these buildings -- the roofs, the windows, the brickwork -- is far better than any house I've ever lived in and probably ever will.
I look at some of those buildings and wonder if maybe as my daughters get older we can rent a space for a wedding in there, because that's the quality of facilities they've built. I don't know where we went wrong. I don't know why people decided they had to build these things to the level they did. The accountability, sir, is not being adhered to by municipalities, and I would be very glad to give you some examples in private.
Mr Pouliot: You don't plan on running for council, do you?
The Chair: Mr Mondell, on that note, we thank you very much for coming before us this morning.
Mr Mondell: My wife would give you a different answer.
Mr Gerretsen: That's on the record, isn't it?
JOHN CROSSINGHAM
The Chair: At this point I'd like to welcome the deputants from Crossingham, Brady, Miller, please. Mr Crossingham? Welcome, sir. The presentation time of 30 minutes includes your own presentation and the questions from members of the committee.
Mr John Crossingham: I'll try and be brief. I am here on my own behalf. I am a solicitor. I've practised law in the city of St Catharines for 25 years. I practise principally in the area of municipal law and assessment law. I have the great privilege of acting for the town of Niagara-on-the-Lake. I also have the privilege of acting for private developers, and I've seen this circumstance evolve from both sides of the fence. I think there is a role for responsible municipal accounting in the development charges, and I think there is generally a willingness on the part of the development community to make a reasonable contribution to the improvement of the communities they are in.
With that, there is one overall theme that I'd like to leave you with. If there's only one thing you remember from what I've said -- I think it was Woody Allen who used to have "Author's message" flashing on the screen at this point in time -- it is that development charges should be a global charge for all offsite services within urban areas. I'll discuss that concept in a number of veins.
I've seen the issue of development charges in the town of Niagara-on-the-Lake, for example, evaporate when people say, "Well, we're paying this amount but what are we paying it for?" and when they realize that that is it for offsite services, that they aren't going to be hit with additional charges for doing their own works offsite, that there's a total charge for the amount to be paid, the objection generally evaporates.
What this involves is some requirements on municipalities which, surprising as it may seem, don't seem to be universal. First of all, this concept would require municipalities to actually know what they were doing to service offsite. The level of development generally is an unknown and, consequently, you have ad hoc circumstances arising where the municipality will say: "That's fine. You have an urban designation in our official plan, but we don't have the services in that section for you to proceed. So you're either going to have to front-end the services into that area" -- and I think you've probably heard a great deal of criticism of the ineffectiveness of front-ending" -- "or you'll have to construct it and hope that we can recover the costs from subsequent developers," and I've seen that create a number of difficulties. In fact I've got an OMB hearing in just about a month's time where exactly that issue is going to come up between two developers.
The necessity in municipalities that are imposing development charges of making the development charge a complete list of what needs to be done is something that perhaps is beyond the scope of the legislation but it would certainly eliminate, I believe, a great number of the disputes that have arisen and would not give rise to these ad hoc circumstances. You should be aware that under the current section 45 of the Development Charges Act there is a prohibition against a municipality entering into an agreement to levy charges for specific services that are offsite. That piece of legislation, I believe, was designed to make development charges a complete service.
The problem with that is that the municipal board has interpreted that section so that the municipality can't force an agreement, but they have made it a requirement of receiving draft plan approval for subdivisions. So in effect, the old ad hoc bargaining situation can arise again, and does, and is dealt with on, as I say, an ad hoc basis that really is the luck of the draw. If your development happens to be the last development in a string of developments and all the other ones have been allowed to go ahead with, for example, inadequate storm drainage, all of a sudden you're sitting there faced with very extensive works onsite, the principal purpose of which is to deal with problems that have been created on other people's lands, and I can give you specific examples of that in the town of Grimsby where we have exactly that problem.
There is a second aspect that's important in this in dealing with the global concept of development charges. It is that municipalities have had a tendency to play catch-up. There are circumstances where the level of service is set -- and I believe the legislation will be addressing this and I think that is a good idea -- and therefore there will be an understanding of what has to be contributed to. The difficulty, of course, is that in official plans and other documents, studies in the municipalities, they create in essence a wish list of how they would like the community to be. It's a good idea to have that, but when those standards are then turned around and incorporated into the development charge, the preponderant payor is always this person who is not there.
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I can give you one example, since examples seem to be important: In the town of Lincoln we have a situation where there is a storm water requirement. There have been existing flooding problems since 1978. The storm water in the area is contributed 62% from either municipal roads or existing development, but when you look in the development charge at how this is to be spread, the municipality picks up $1.5 million out of the $4-million bill, and $2.5 million is put on the development community.
On top of that, a $500,000 pipe that's necessary for my client to connect into the system isn't in the development charge, so he's going to be faced with one of these ad hoc situations where if you want to go and connect to this facility that you're contributing to, your particular piece of land requires an extra piece of equipment. I haven't got the request for that to be a condition of draft plan approval yet, but I'm expecting that will be forthcoming. I know my client would be quite delighted to know what the total bill was and to pay a fair share towards that.
Soft costs drive the development community crazy, and I can say that in the town of Niagara-on-the-Lake our soft costs are minimal. Our administration cost out of a $6,000 development charge is $128 and it goes entirely to the cost of future studies. We don't have town halls in it. There is a library charge. We don't have museums. Most of our development charge is into roads, sewers, storm water, watermains. As I mentioned in my memo, the development community is looking for steak and potatoes. They aren't looking for ice cream and chocolate cake. If you can produce a development charge that addresses the hard service issues, my experience is that a municipality will have little difficulty with the development community.
Finally, there's need for coordination of an overall approach to charges because one of the principal areas where you may hear complaints or may have heard complaints is in the area of park because there's an overlap between the cash-in-lieu-of-parks dedication available under the Planning Act and the possibility for park dedication under the development charge.
The new act goes some distance to address that issue because they are trying to eliminate park dedication as a portion of the development charge. What I would suggest is that there's another -- I won't call it a loophole -- possibility under the cash-in-lieu provisions which has been exploited by some municipalities and led to some difficulties, and that is that the cash-in-lieu-of-parks dedication can be collected at the building permit stage on building permit value.
If you take a typical piece of subdivision land as raw land that might be worth $40,000 or $50,000, you take 5% of that per acre and you have a contribution for parkland on a raw land basis. If you take it as development land, it would probably be worth $50,000 a lot, and you're looking at probably six, seven or eight lots per acre, so that the amount of the charge goes up by somewhere between six and eight times.
The result of that is that there really is no need, in my opinion, for either a park improvement charge or a park dedication charge in a development charge where the funds are collected at the building permit value because what you've got built into that 5% is not only the raw land cost for acquiring the park but also all of the development and improvement costs, which should go a long way towards compensating for arenas, ball diamonds or the other facilities that would be attendant on a park development scheme.
In some municipalities, of course, you'll run into those costs being collected in both instances because the municipality would collect at the raw land stage on the subdivision but might collect at the building permit stage on a severance or a redevelopment of lands. Under those circumstances, if the municipality had a park improvement portion to their development charge, there should be a setoff against the park improvement portion where they're paying at the higher rate.
The municipalities also have the ability to levy charges under section 221 of the Municipal Act and, interestingly enough, there is no appeal to the Ontario Municipal Board. There used to be about 10 years ago and it was removed. That section allows water and sewers to be installed. Again, it would be useful if the legislation had a mandatory setoff so that if you were paying for offsite sewers by virtue of a charge either under 221 or under the local improvement act, you got an automatic setoff against the portion of the development charge that was dedicated to the same service. So if you were already actually paying for offsite sewers, you wouldn't be paying towards communal offsite sewers because you had a specific dedicated amount that the funds were going to.
The situation is slightly different where you're dealing with offsite services in rural areas rather than in urban areas, and in the municipalities in this area we have both circumstances. In cases where municipalities have differentiated development charges -- in other words, a universal charge throughout and then an urban service area charge for the hard services like water, roads, storm and sanitary sewer -- having an offsite specific charge there makes a certain amount of sense and that could be either handled as a front-ending circumstance or as an area of specific development charge, and that would allow development to proceed.
The real plea, I suppose, is that this legislation be directed to urging municipalities to develop not only pretty pictures and fancy coloured drawings in their official plan but the nuts-and-bolts servicing that goes with it. Knowing what needs to be done in an area will allow the development community and the municipalities to work together towards achieving the installation of those services and the proper sharing of the costs.
The Chair: Thank you very much. We have just about five minutes per caucus, and we'll lead off with Mr Sheehan, please.
Mr Frank Sheehan (Lincoln): John, how are you doing?
Mr Crossingham: Wonderfully well, Frank, actually.
Mr Sheehan: Good. I have one question.
Mr Crossingham: But maybe you should pass judgement on that rather than myself. I don't know.
Mr Sheehan: You stated you had done more skiing this winter than I have, so I'm envious.
One question: Do you think that the proposed act will go a long way to addressing the habit or the practice, I guess we'll say, of some of the smaller communities that you and I know of when they start talking about these development agreements and then they use the -- I don't know how they work it or manipulate it, but I'll put it this way, they apply undue influence on the developer or on the land owner to reopen old agreements where they forgot certain things or just generally compromise the developer's rights, I guess is what I'm saying.
Mr Crossingham: The development agreement is slightly different than the development charge. As I alluded to, not having the development charges as a global charge leads to the possibility of the municipality saying, "Well, that's fine, but we need to have this particular pipe installed in order for you to connect, and that's an additional charge."
The only way of dealing effectively with the development agreement is to make sure that the municipal board process -- because that request by the municipality has been effective in the past regardless of what the equities may be because of the time delay involved in getting the matter adjudicated. If the municipal board hearings -- and they are getting much better, I want to say that. I've been getting hearings that have been coming up much more rapidly lately that I had in the last five years -- are quick enough, the developer would be able to say, "That is unfair and I want it adjudicated" and have an effective adjudication.
That's the key to eliminating that type of strong-arming by municipalities and that's far more effective than any alterations to the Development Charges Act. That really is your administration and the municipal board does an excellent job.
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Mr Sheehan: So the clarity that's put out in here, like the requirement to do a plan, a requirement that would specify what's going to be included in the development charge, and also to attribute or allocate -- what do you call it? -- expanded use to existing taxpayers, and therefore apply credits, that's a big improvement?
Mr Crossingham: Absolutely; no doubt about that at all.
Mr Hardeman: Thank you, Mr Crossingham, for your presentation. I just wanted to go to your development charges and the global charge. At the end of that part of the presentation you talk about soft services independently. In the global charge, do you feel that soft services should be part of the global development charge bylaw?
Mr Crossingham: I have a great deal of difficulty with the soft service portion of development charges because they are so difficult to pin down. The level of service is so hard to enumerate and to quantify. By and large, I think that has been open to so much abuse. If you can tie it down tightly by setting some objective means of standards, the continuation of that might be appropriate, but all in all, the area is one far more capable of abuse than productive assistance.
Mr Hardeman: If one separated the soft services from the hard services and set a standard -- so much population per square foot in an arena, so much for ballparks and so forth -- is there any reason why for soft services you would have a different development charge in different communities, why you would need to redo a study in each one? Would the cost of an arena in Mississauga not be somewhat similar to the cost of an arena in Niagara-on-the-Lake?
Mr Crossingham: I think you're probably accurate with that. The concern is how you tie it in with the park dedication. That's an area that's open to great abuse. I can give you a specific example. In Lincoln, under the development charges that existed at the beginning of this year, if you had a lot that was worth $50,000, you would pay $2,500 under the park dedication, cash in lieu, and in addition to that you would pay $1,428 for the park improvement portion of their development charge. Every new homeowner in that community was paying close to $4,000 for parks.
On top of that, under one development agreement the town attempted to gain a contribution under the development agreement for a contribution to a local park, and I think they wanted another $10,000 or $12,000 from the developer towards that park. We dug our heels in and said, "This is ridiculous, this is a triple charge," and the municipality backed off, but that still cost time.
Mr Sergio: First off, I have a quick question and then we'll see if I have a second question, depending on the answer. But thanks for coming down and making a presentation. There are three things attached to the bill as it is presented here: one says, to create jobs, the second, to make municipalities more accountable, and the third one, to recover development charges. I'll leave the last one for another question later on.
Whether it will create jobs, I really have doubts. We haven't heard really from anyone, including the developers, that this will create jobs. All right? With respect to accountability, and let's take the case of your own municipality here, local governments are responsible to all the municipality, not to a particular applicant or a particular location. I'll tell you why I give you my views and then I'd like to hear your comments, if that is the municipality's way of doing their own municipal work.
If we take the four corners here, Ontario Street and 410, or the Queen E, which attracts all the development, if you as the local municipalities are not able to spread the income from those four corners which attract development because of the location -- it's got the cultural centre, it's got easy access, whatever -- if you don't have the means, the flexibility to spread that income throughout the municipality, it means the rest of the municipality will suffer and the four corners will have everything. Do you think that's fair from a municipality point of view, that all the development is concentrated at four corners, getting all the income, that it should be concentrated solely in that little corner there while the rest of the municipality suffers because you don't have development in the poorer areas of the municipality?
You, as local councillor or mayor, should have the flexibility to say: "Sure, we're getting development in a very demanding area, but we have to provide facilities in the other areas of our local municipality where it's poorer, doesn't get development. Developers don't go and build in there." Don't you think you should have the flexibility to use those funds to locate facilities in poorer areas, even though development concentrates in one particular corner?
Mr Crossingham: Are you referring to soft costs principally, or are you referring to hard costs?
Mr Sergio: Referring in general to funds that you get from one particular area.
Mr Crossingham: I think the answer to that question is really whether the municipality chooses to have separate development charges for portions of the municipality or whether it levies a development charge equally across the municipality. If it's equally across the municipality, I don't see anything wrong with, and indeed the municipality I act for collects, a uniform development charge across the municipality. The only differentiation is whether you are in an urban or outside an urban area. If you've got urban services, then you kick in for water and sewer and roads and those upgrades.
But it doesn't matter if you choose to develop at the Glendale interchange in Niagara-on-the-Lake, as we hope we will shortly, or you're in the old town of Niagara-on-the-Lake or in Virgil. Those development charges are the same and they are done on a pooling basis communally, and I don't see anything in the new act that's going to take that right away. So I agree we should have the flexibility; I don't see how the new act removes that. Indeed, that's how we've approached it.
The town doesn't have any particular fear, as far as I can determine from discussing with the staff and the engineering department and the finance department, about the new act in Niagara-on-the-Lake, because we've always dealt with the development charges on the responsible basis that the legislation now seems to be enforcing on more universal grounds.
Mr Pouliot: Thank you kindly for your insight. It's an excellent presentation. One of my colleagues has mentioned the preamble of the bill. You've obviously been through many pieces of legislation, and either they create jobs or they stimulate -- governments successively are very good at drafting this. I seldom see a piece of legislation that is sponsored by whatever ministry that doesn't -- it's a good-news item. It's called "spinning it that way," and they do that quite well.
This bill does help stimulate, promote, encourage the developers. It's one component in making Mr Mondell's and his distinguished colleagues' competition at the marketplace a little better. Mind you, Dave would be the first one to admit that if Mr Greenspan talks in his sleep or gets up on the wrong side of the bed one morning, that too -- and his friend and close cousin, Mr Thiessen, to follow suit. Give him about a month, a month and a half, we'll see, at most.
The demographics also play a part, and the general state of the economy. So this is along that side, but let's make no mistake about it. I've been with this vulgar trade for 12 years, and before that I had 10 years at municipal council. We always thought that we were more judicious at spending our money compared to the next town. We had the answer for everything in that field of endeavour, which we knew very little about, but they were always getting more money and not doing as good a job.
Assuming that not 100% of the savings will be passed along, it doesn't quite operate, it's not that perfect, it would mean there was less money in the community. Now the corporation will have to pay for the development. By way of a question, are we to expect fewer services, coupled with a higher levy at the residential, commercial and industrial levels, because we have to see the development? If we assume that the money is not being wasted, that those days are gone, people get more value for money, due diligence is the order of the day, where is the money going to come from? Otherwise, those people will have to believe its tales of Houdini.
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You see jobs there, but who's going to pay for this? Because now the developers are not going to fork the money over, the citizens will, so it's called a levy. You can't have it eight different ways. What will happen?
Mr Crossingham: I think the idea I'm proposing to you is to use the development charge as a means of the community sharing among itself -- and that's the development community and the existing residents -- the cost and benefit of the development. It is in essence using the community as a facilitator. Let's take an example. We've got a stormwater pond in Lincoln, okay? I've got this meeting coming up tomorrow morning. One fellow there is a farmer. He farms his land, so his taxes are quite low, but he happens to own the piece of land that's key to having the stormwater pond on it.
His carrying costs are very low. Now, upstream from him you have people who own the land, who've paid development prices for it. It's in the urban area boundary; they are anxious to go. The role the municipality can play in bringing those people together and in setting a charge and in sharing that cost, because the bargaining positions among those people -- strange as it may seem, the farmer is in the strong position.
I hate the phrase "win-win," but by imposing a development charge, by knowing what their works are, where they're going, how they're going to engineer it, how they're going to pay for it, the community allows the whole process to proceed, whereas otherwise it becomes roadblocked because one person decides, "Well, I'm not developing right now; I'm quite happy to continue to plant grapes." Then the whole thing grinds to a halt. The development charge, by spreading that load among the municipality, can provide a very real vehicle if the municipality uses it wisely to facilitate development within its boundaries at an economic price.
The Chair: Thank you, Mr Crossingham. You bring a new perspective to the committee this morning and we thank you for sharing your views with us.
NIAGARA HOME BUILDERS' ASSOCIATION
The Chair: I would now like to call representatives from the Hamilton Home Builders' Association, the Niagara region. I believe it's Mr Rawlings and Mr Szpirglas. Welcome.
Mr Ian Rawlings: Thank you very much, Madam Chairman. My name is Ian Rawlings. I think, for the record, I could clarify perhaps what was some miscommunication. Both Larry and I are here indeed on behalf of the Niagara Home Builders' Association. I'm sorry for the confusion. I suspect we created it, but I believe we can clarify it. The record's clear now.
I'm a planner. My friend Larry is a builder. I'm also past president of the Ontario Home Builders' Association. I'm also a director of the Ontario New Home Warranty Program. Clearly, we both work in the residential construction industry here in the Niagara region and we also represent that industry at the land development committee of the Ontario Home Builders' Association.
On behalf of the builders in the Niagara region, I'd like to thank you for holding this meeting in our area. We appreciate the extra effort of travelling around the province to hear the views of people who are affected by development charges. I'm sure you're all becoming fans of each successive municipality's hotel accommodations.
Mr Gerretsen: We drive home every night.
Mr Pouliot: You make the question so easy.
Mr Rawlings: I'd like to take a couple of minutes to give some general context to the policy debate that has driven Bill 98. Then I'd like to turn things over to Larry to talk about some of the more specific provisions of 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 the text of my remarks, you'll see a chart that sets out data for four different years for the Niagara region. The 1985 data is for lot levies that were being collected under the Planning Act. The 1989 data is also for lot levies. This data shows the sort of increases in the 1980s that were giving us cause for concern then. In four years, levies more than doubled in Fort Erie and Lincoln. In general, they were tending to move toward the high end of the 1985 range.
The next column on the chart is the data for 1992. This represents what we'll call first generation development charge bylaws that were passed under the original Development Charges Act. You can see that one apparent and obvious result of the new legislation was huge increases in levies, or development charges as they are now called. The charge increased by a factor of 12 in Thorold, six times in Fort Erie, and quadrupled in Niagara Falls.
These increases did not occur during a time of growth. In 1989, just over 3,500 houses were built in St. Catharines. Since then, annual housing starts have fallen by 50% to 60%. During the same time, charges in St. Catharines more than doubled. This single fact, more than any other, explains why the home building industry has called for the reform of the Development Charges Act. It explains why we are also supporting the restrictions that are proposed in Bill 98.
I want to say a little bit more about this contrast. The original Development Charges Act was conceived and enacted in the 1980s, but the legislation was not implemented until the 1990s. During that period, the housing market changed dramatically and, I would argue, permanently. The principles that were embodied in the Development Charges Act may have been acceptable in the 1980s, but they are, in my opinion and in our industry's opinion, entirely inappropriate for the 1990s and for the foreseeable future.
Let's think about the typical home buyer in the 1980s. He or she was probably a baby boomer. The family probably had two incomes. The jobs were full-time; they were permanent. Real estate values had been climbing, so stretching the budget to buy a house, you could justify it on the basis of an investment in an appreciating asset, and in any event, we were all willing to take on debt.
How many of those characteristics apply to home buyers today? Quite frankly, how many of them apply to any of us today? If you said "none," you probably have as good an understanding of the market as anyone. Now, some buyers may still be coming from the end of the baby boom, but jobs aren't secure. Employment is shifting to contract and part-time. Real estate values are just starting to edge up after a lot of buyers in the late 1980s lost equity, and consumers are more interested in paying down debt than they are in acquiring it.
I invite you to take a moment from your travels and spend an afternoon in a sales office and find out just how price-sensitive today's buyer is. I think that experience would be more than enough to convince you of the negative impact that high costs have had on the market. It should also convince you of the competitive nature of the market. I add that just in case you're tempted to think that savings on development charges will not be passed on to consumers.
I'd now like to turn things over to Larry to talk about some of the specifics of the bill.
Mr Larry Szpirglas: Thank you, Ian. When the government asked us what sort of charges we thought were necessary, we had a simple list: (1) to restrict the scope of eligible services; (2) to define "growth-related" in terms of benefits; (3) to limit the level of service that can be financed by development charges to a historical 10-year average in a municipality; and (4) to improve the accountability so that homeowners have some assurance that they will eventually get what they paid for. All four of these are discussed in detail in OHBA's written response to Bill 98. Today I want to confine my remarks to the first two points.
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With respect to scope, part of the problem with the current scope is the long shopping list that translates into high charges, but this is only part of the problem. Development charges are flat-rate, regressive taxes. These two characteristics make them an inappropriate revenue source for many services that are currently eligible.
Flat-rate taxes do not encourage conservation, so they should not be used for electricity or solid waste. Both uses are still allowed under Bill 98.
Regressive taxes should not be used to finance services that redistribute income. Both libraries and education involve an element of income redistribution and both are still eligible under Bill 98.
In addition, capital spending forecasts for development charges are calculated over 10-year periods, but some of the eligible costs, like furniture and rolling stock, will be depreciated in less than 10 years. There is no reason to use development charges to finance the initial purchase of these things.
The government has moved in the correct direction in limiting the scope of eligible services, but further restrictions are consistent with sound principles of tax policy.
I want to turn to a definition of "growth-related." The current Development Charges Act says that the charges can only be used to finance growth-related capital expenses. It then defines "capital," but it does not bother to define "growth-related." As a result, many municipalities use what is called a trigger test to determine whether an expense is growth-related, and that test works like this: If the municipality did not grow, current services would not have to be expanded or upgraded. If there is growth, the services need to be expanded or upgraded. Therefore, the entire cost of expansion or upgrading is growth-related.
If you say it quickly, it probably sounds reasonable, but not if you consider the benefits. If you widen a road, existing residents will benefit from reduced congestion. If you build a new indoor recreation centre or library, people will come from across town to use the newest and latest equipment. As well, there's a possibility that the building of a new facility might not necessarily be in the area of new development.
As well, sometimes when you expand something like a sewage treatment plant, you have to upgrade the plant to current standards. Why should the entire cost of upgrading a substandard plant be deemed growth-related and financed by families in newly developed areas?
Proponents of development charges often justify them by saying growth should pay for itself. This principle may or may not be reasonable, but let's accept it for the sake of argument. The trigger test that many municipalities use entails far more. It means that growth ends up paying for itself plus the needs of existing residents. By defining "growth-related" in terms of benefits, we help ensure that growth will not be forced to pay for more than itself.
To summarize: As background to specific amendments, we have tried to explain how changes in social and economic conditions have made the original Development Charges Act outdated. Turning to specifics, we have argued that certain services should not be financed with development charges as a matter of tax policy, and we have explained why "growth-related" should be defined in terms of benefits.
Thank you for your attention and we'll certainly try to answer any questions that you have.
Mr Gerretsen: Thank you very much, Mr Rawlings. I'm very intrigued with your presentation. I think what you've probably outlined for me is the notion that -- I'm just looking at your chart -- the rates do not just go up but they also come down.
The point I've been trying to make, or at least that I'm sort of stuck with in my own mind, is the notion that municipalities surely somewhere along the line will realize the fact that if they want to have development take place in their municipalities, if the development charges at that particular point are too high in relation to other adjacent municipalities, they will lower them. I see, according to this chart, this has actually happened in some cases.
Why it's happening in some places and not in other places, I don't know; there may be particular local circumstances I'm not familiar with. Would you like to comment on that? I notice that three or four of them have come down. I assume it's as a result of development pressures.
Mr Rawlings: I suspect you've accurately assessed why those reductions may have taken place. What I would suggest to you, however, is that the reductions you see are largely within the period of 1992 to 1995. What I think it speaks to is what we believe is one of the major flaws out of the whole prospect of development charges; the legislation that was last put in place essentially is where the major flaw is. It allowed a broadening of chargeable items, if you wish, to be encompassed within development charges. Many municipalities, quite frankly, took advantage of the legislation, and I'm not sure I can fault them for that.
I think some of those municipalities equally have understood, through the passage of time and as the housing starts diminished and dried up in their municipalities, that they were losing out. They were losing out on tax assessment on the houses that were otherwise to be built; they were losing out in having people employed building those houses; and they found that being dramatically impacted were their other user fees usually associated with all the activities of getting housing built in the community. In response to those situations, there are certainly municipalities that have said, "We've got to deal with the problem here at home to the extent we can," and have reduced some of their charges.
Mr Gerretsen: I guess the point I'm trying to make is that if we believe that in your business it's supply and demand that drives it at any given time, wouldn't those same principles apply to municipalities as to how much and for what they're actually going to charge? There somehow seems to be an underlying theory that most municipalities don't know what they're doing, that they're being run by incompetent staff and councils etc. I suppose there are just as many incompetent councillors out there as there are incompetent builders.
Mr Rawlings: Probably right; that's correct, yes.
Mr Gerretsen: Why wouldn't those same principles that run your business run the amount of development charges that municipalities will or will not charge at any given time?
Mr Szpirglas: Mr Gerretsen, I think there are couple of answers to that. As you know, in business timing is everything. One of the big problems we encounter as builders and developers is the gigantic bureaucracy we have to negotiate through. That comes into play both in negotiations around the development charges in terms of their initiation and also decreases in those development charges.
I know there was a presentation made earlier by some of the municipalities. There was an inference that they had worked very closely with the home building industry to reduce the charge significantly. I think the amount was from about $10,000 down to about $1,800.
The reality of that negotiation was that it was anything but friendly and it was extremely intense. The reality was that the decrease came about as a result of the industry being able to basically pick apart the proposed bylaw, and second, to threaten to go the OMB. I think that becomes part of the problem; it becomes part of the equation in the negotiations process.
We usually receive the bylaw about two weeks before it goes to a public meeting, so the ability to discuss and negotiate and take a look at a reasonable explanation of why charges exist is very limited to the industry. But over and above that, it would be foolish to think it's an easy kind of negotiation that occurs.
The charges are down for a variety of reasons. One of the problems is that timing is a problem, because by the time you work it through the bureaucracy it may be too late for you to catch the market.
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Mr Gerretsen: Just one final question that deals specifically with time. It's always been my experience that it's the speed with which development gets approved that is probably a much greater issue than anything else. Do you have any comments on that?
Mr Rawlings: It's certainly of interest to the development industry, but what we're really speaking about here is representing the interests of the consumer who's trying to buy a house, who's trying to grapple with the issue of affordability, who's trying to get their foot in the door. To a certain extent, their ability to achieve that is barred because the act we have in place now has set the floor too high.
Mr Sergio: Do we have time for another quick question?
The Chair: Thirty seconds. That's it, and I'll cut you off.
Mr Sergio: What is the problem here? Is the problem with high fees, development charges, whatever you want to call them, or are there other problems, as you see it? If it is strictly high charges, can't we work that out? I am sure some changes are required in some areas in municipalities. But is your problem bigger than that? Does it have to do with more than high development charges or does it perhaps have to do with how some municipalities, not all of them, run their business?
Mr Rawlings: Unfortunately, there's no easy answer. I think there's a combination of issues. Clearly, our interest is to be able to ensure that the costs borne by our customers are legitimate, that they're associated with the costs incurred in producing the product they're buying -- and no more. That means we need to deal with the act, and that means, in some places, that we need to deal with municipalities that perhaps are greedy.
The negotiation process that Larry described to you largely revolves around the space between the floor of the charge that would be otherwise sustainable by the legislation and the figure the municipality ultimately chooses to levy.
Mr Pouliot: Mr Rawlings, I did appreciate your sensitivity about the motels. On Monday it was the Crown and Anchor, on Tuesday it was the Maple Leaf Motel, but all of them have fresh sheets. Some first-time members, and I can understand their dilemma -- the people opposite, for instance, would much rather be on the road than at home. When you're the government, not all politics are local; if you go away, maybe people will forget.
I'm intrigued with your page 5. Do I still have immunity? I won't repeat it outside but it seems to me, and this shall remain nameless, that there was an opportunity here to take money. I see some charge from 1985, $370; 1995, $5,000. The price of brick and mortar did not go up that much, no way. It was an opportunity and people seized it; they filled the vacuum. It's not all bad, maybe, but you feel you've been targeted, that you were victimized. That's bad because you preach for your parish -- nothing wrong with that.
You see, the money went from you and into a vat called the general fund. No treasurer, no chief administrative officer, likes dedicated amount. They like to take all the money and put it together, and then out of the concoction they dole it out. That's what they do. People don't like dedication, because then it commits them. It saps their energy. It could cost them votes. They lose the loyalty of colleagues. It's very, very important. I had four ministries with the other administration.
You see, you get a break today.
Mr Rawlings: So far, I guess.
Mr Pouliot: If I want to avoid the fate of Trizec, Olympia and York, Tridel, Cadillac Fairview, Campeau Corp -- if they weren't so low, I would short every damned one of them. At least I wouldn't die poor.
When I see those communities and they know you've been getting that break -- it's cause for celebration, but be cautious. I never underestimate the ability of elected officials to get you. With some of them, you'll start thinking you have a new definition of organized crime, because they'll come and get you one way or the other. Otherwise, you won't have the services. People will shy away from development. It's not good news; it's bad news. What do you do there? What's your fear? Imagine I'm on your council.
Mr Rawlings: First of all, sir, I lost my hair honestly. I understand some of the things you're referring to. I'd like to clarify some of your suppositions behind your statements. Number one, my constituency today is purchasers of new housing. They're not my industry association. What I'm looking for is a fair deal for those people.
The void or the vacuum that you referred to that is obviously apparent from the increases in the figures is exactly the issue: Is it a vacuum that was created because of need that needed to be appropriately addressed by tacking additional costs on to the backs of one small component of the community? I think not. I know not. It makes my point, sir, that the act we are attempting to correct and revise is to a large extent the fly in the ointment. It has allowed, in fact reinforced, many of the actions to municipalities' increases in their development charges because the legislation allowed them to do it.
Mrs Fisher: I really don't even know where to start. He's such a hard act to follow. I'd have to have a few classes before I could ever get near that.
Mr Pouliot: Would you like me to continue?
Mrs Fisher: It's refreshing, but -- anyway, thank you for your presentation this morning. As we go through each of those, we each learn something. I think that's the purpose of why we're here.
I have a couple of comments and then two questions. I'll probably be cut off before I get through this. The first one is that I'm looking at the increases in development charges over the number of years. I'm sure you could do this, but for somebody who doesn't live in this area it would have been very interesting to see what it did in terms of new housing starts, the impact on the same years. Where the development charges were going up, it would be very interesting to see what that did in terms of impact on new housing starts. Without having that in front of me, do you have some idea of what that did?
Mr Rawlings: I think it's fair to say that we would all understand that this is one part of a puzzle. We can't deal with the other parts today, but I think in my presentation remarks, the indication I'd given was that these increases were clearly occurring at a time when housing starts were dropping and dropping dramatically. In response to an earlier question, it's equally clear that some municipalities have seen that there is a role they can play in reversing those trends to the extent that they have reduced their development charges as an opportunity to initiate, to kickstart, if you will, and resuscitate an otherwise languishing new home construction market in their municipality.
Mr Szpirglas: It doesn't necessarily relate to this area. In Hamilton-Wentworth the combination of reductions to the development charges, both by the region and the city of Hamilton, resulted in, in 1993 or 1994 -- I'm not sure which year -- that community becoming one of two across of the province that saw two or three new subdivisions being started, directly as a result of those reductions. It gave enough of a reduction that it gave some confidence to the developer-builders to move forward. That resulted in a number of things; it resulted in some employment in that area. That's one example that's fairly concrete that we could certainly put forward.
Mrs Fisher: I represent a rural riding and I do have some municipal background as well, and the discussions in the settings we've travelled to over the past couple of days are quite different from what often you find in a rural setting. Whether they should be is another question, but I can tell you that they are different.
I do agree with Mr Pouliot that the fees find themselves flowing into this general revenue fund or into this general reserve pot, untagged. I agree also that part of the bill is intended to bring more accountability and better identification as to where those funds are going and for what purpose, and that they be there when the time for drawing on them comes.
For the home buyer, if that is what this is generally intended to do, to resolve that grey area, how would it best be done; that a municipality that holds those reserve funds identify them so that the new home buyer coming in knows at the start what to expect in the future when the demand for the service that they as a community decide is needed, through direction to their council, and how would you, as a developer -- I guess the question would be, you would be more comfortable knowing that those development fees would be eventually expended on what the purpose was in the beginning, and the council would have a clearer picture as to where they're going and have those funds available when they're needed. Would you agree that this is now going to be managed through this bill?
Mr Rawlings: Certainly there are some opportunities for significant improvement over the situation we've experienced more recently. Being able to predict that the works identified as necessary to support the growth are going to be funded and are going to be built, the predictability and the accountability in terms of setting those moneys aside and directly tying them to the piece of infrastructure, is part of what is necessary and part of an improvement that we clearly see in the bill.
Many of the issues and many of these costs -- quite frankly, the purchaser of the house really doesn't care. They want to buy a house and know that when they turn the tap on there's water, when they flush the toilet it disappears and so on. We'll call those hard costs. To a certain extent the predictability and the accountability with respect to those items is something that's necessary to give some confidence to the development industry that where there is infrastructure required to sustain growth, it will be in place when you're able and ready to bring product on to the market.
Some of the less hard costs, if I can say it that way, are those things that the customers do want to know about and to a large extent don't. When they do, the predictability of them being there, actually being funded as opposed to having the money slid off to some other favourite project of the year I think is a necessary component. Having some of the costs attributed to the existing tax base I think does two things, not the least of which attributes the benefit more equitably, as Larry's remarks spoke to. But it also brings that constituent and that ratepayer and that taxpayer into the debate and discussion and hopefully a decision-making process about, just what kind of facilities do we really want, can we afford, and when do we want them? Until those people are brought to the table, the people who are buying the houses don't have a voice.
The Chair: Thank you very much. We appreciate the time you've taken to come before the committee this morning with your views.
For the committee members, that ends the deputants for this morning. We will recess and resume hearings at 2 o'clock. We have three presenters this afternoon, until 3:30.
The committee recessed from 1244 to 1406.
The Chair: I call to order the afternoon sitting for the third day of the standing committee on resources development hearing deputations for Bill 98.
Just to remind the committee members as we begin, the next time we will meet to hear deputations is on Monday, April 21, in the afternoon, then Wednesday the 23rd, and then clause-by-clause will occur on the following Monday, the 28th.
Mr Galt: Just one day for clause-by-clause?
The Chair: At this point, yes.
Mr Sergio: What about the other day of hearings? We're supposed to have two days of hearings in Metro.
The Chair: Yes, the 21st and the 23rd, the Monday and the Wednesday.
JANNOCK PROPERTIES
The Chair: Our first presenter this afternoon will be Jannock Properties, Mr Fasken. Welcome.
Mr Mitchell Fasken: Thank you very much. Madam Chair and members of the committee, you've been distributed a copy of the presentation, and I'll do my best to follow it. I'm not much for reading and memorizing speeches. I'll probably diverge from it a great deal as we proceed, but hopefully the general intent follows the presentation.
My name is Mitchell Fasken. I'm the vice-president, real estate, of Jannock Properties, which is a division of a company known as Jannock Ltd. Jannock Ltd is a large, publicly traded manufacturer within Ontario. We are the largest producer of clay brick in Canada. Canada Brick is one of our subsidiaries. We produce vinyl siding, metal decking, metal siding, steel tubing. We are in a number of facets of the building industry in both Canada and the United States. Real estate is a non-core business for us and is a division which deals with our remnant manufacturing sites, residual lands and other holdings.
I come to you today wearing both hats for Jannock, because development charges have an impact on us from a real estate aspect but also have a significant impact on our manufacturing business and its direct relation to this economy in terms of employment, job creation and tax considerations. Development charges are an issue which in principle we support. We support the principle that growth must pay for itself. The issue is, what level of growth and what cost of growth, and what do we use as a benchmark and a basis?
Over the past three to four months, as all of you are aware, there have been a number of areas of agreement on the new Bill 98 between the development industry, UDI, non-members of UDI and the municipalities. I think we're now down to a narrow group of issues that are unresolved. We have sat with UDI as a non-member for approximately five years, interested in very specific issues from both our manufacturing side and our real estate side. About a year and a half ago, we decided to become an active member of UDI because we recognized that some of the issues were significant and had to be addressed, and UDI's balanced approach to many of the issues really enticed us corporately to become an active participant in that group.
In reviewing development charges, we really see there being a small group of unresolved issues. They are, generally: level of service; accountability; the issue of copayment or municipal participation, however we'll phrase it; waste management; transit; and hydro.
Before I touch on that, I want to just divert away for one moment. Since 1983, many of us saw real estate values rise; we saw inflation rise; we saw our standard of living rise until 1991. From 1991 -- and I was hoping there would be an easel here, so you'll have to bear with me, with one hand. From 1991 to 1996 we've seen drops in residential values, commercial values, commercial rents, of approximately 30% to 40%. In that same window, 1990-96, development charges through indexing alone have gone up between 10% and 15%. Everything is running a little bit backwards. Throughout industry, we've had to do more in our business with smaller margins and less employees, finding ways to struggle through. We haven't been able to just increase our costs annually.
While all of these factors have had an effect, probably the one exception to that was cost indexes. This is one of the bases on which development charges are based, the construction cost index, which just continues to rise. Realistically, value, salaries, net take-home pay, everything else -- and all of us know -- it's all reduced and continues to reduce. If we look at what has happened in terms of average rents for both residential and industrial buildings in terms of value, we've seen a consistent drop in residential value. Both of these charts are attached to the back of your package for reference.
Recently we've seen an increase in industrial rates only because no one has been building. When you add 20% to the cost of a building for development charges, people really think twice about, do they build, do they renovate an old building or do they simply move south?
We've gone through those very difficult decisions internally ourselves. With our business, we're related to a shale resource and we have to go where we can find a specific form of shale. So for our industry it's not easy to move. With some of our subsidiaries, that has not necessarily been the case. When you look at the cost of occupancy, which is a huge cost, you can many times move and look at alternative locations. Costs of issues such as development charges have a direct impact on the choice of location, the choice of your future facilities.
I'm now going to try to get back to the text of what you have before you, which will be a little bit easier to follow.
Level of service: The new act establishes the need for an average level of service over the past 10 years, which we strongly support. The previous act varied from that and allowed municipalities the opportunity to pick and choose among the highest levels of service. In one example, when we were dealing with the development charges in Burlington, they had brought six new buses on in one year, and that was the year that was chosen to represent the level of service: artificially, arbitrarily high. It drove development charges up, that one single item.
Accountability: This is one area where, at a local level and at a regional level, we have a great deal of difficulty. We cannot, as an industry -- and typically it's an industry of one or two people, because we're not an industry that acts together. This is a very fractured, individual industry, and at times you will get three or four people who will work together, but typically you end up dealing with things on your own in the large majority of cases. But accountability and finding your way through municipal books and having municipalities provide you accurate, clear documentation has been very difficult and is very difficult in the current act.
What we're looking for is accountability, line by line, for projects, clear, long-term capital budgets and defined items so that items are not grouped together under one category. These are items which need to be addressed through the regulations. The municipalities have looked for the opportunity to group things, to group soft costs under "Recreational uses," which would be everything from park acquisition to recreation centres to libraries to other facilities, and just put it all together as a fund. We'd never, ever be able to figure out what they planned to spend and what they did spend. The municipalities do official plans, secondary plans, community plans and 10-year budgets, and with that, they should be able to tell us with a fairly high degree of accuracy their plans and their budgets.
Most municipalities do that today in the current Development Charges Act, and that's critical in terms of the new act, to ensure that the intent of this act in terms of regulations implements the need for clear accountability.
The next item is copayment, which clearly from a municipal perspective has been the most sensitive issue that we've dealt with. I don't really consider it to be copayment. I consider it to be municipal participation, municipal cost savings, or you can just call it belt-tightening. It's the same thing that throughout industry we have had to do. The proposed 30% copayment or discount, whatever you want to call it, has the same effect. It means that municipalities, instead of spending $100,000 to build a facility, are going to have to spend $70,000 to build a facility, and it means that they tighten their belt.
We've been told they can't do it. We've been told that if they do it, it has a direct impact on the taxpayer, and I don't believe that. One of the best examples of this has been the Peel public school board, which has reduced its cost of constructing school facilities by 30%. They have not diminished the quality of the school facility. You may not have marble in the front foyer now, you may not have great architectural tile in the washrooms, you may not have an atrium in the front entranceway, but you'll have a school, and you'll have a school that will function at a reasonable cost.
When you have a cookie jar that you can constantly reach your hand into and no one really cares how much you take out, or no one can account for what you take out, then you reach in more often and more frequently. That's really the best example.
The need for municipal participation, whether it's done through copayment, whether it's done through discount, whatever the vehicle, is critical, because the municipalities need to be forced, need to be driven, to find a way to be strident in their urge to save money and to do things economically. That does not exist today.
I'm a strong advocate of copayment. Whether copayment ends up in its existing form or is revised through an alternative vehicle, it still needs to be at a minimum rate of 30% because that is what will drive the municipalities to do the job and to do it right. We know it can be done. You can build a facility for 30% less than the municipalities project, because all you have to do is take out the tapless faucets, the autoflush facilities, the doors that open by themselves that we don't have to have and that in the future we can't afford to maintain and keep up.
The last three issues which I'd like to address are:
Municipal hydro facilities: This is a rate-driven facility. Previously it was not a development charge item, and it's one of the items which the minister has suggested need to be looked at. It should go back to what it should have been originally, which is rate-driven. As a developer, we put in all the hydro services within a subdivision, and we typically also end up having to do the upgrades on the perimeter of the subdivision. We do the undergrounds, we do the street lights, we do the electrical service to the lot, to the lot edge, we do the transformers, switch gears, everything. What the hydro facility does is provide the main transmission lines and its facilities. It should be able to do that through its rates, to be honest and effective about the true cost of service.
Municipal waste falls into the same category. Municipal waste is user related. It is driven only by the costs of the people that are in the municipality and is not driven by growth. It's driven by the people, individual requirements. If I pay development charges, I don't get a credit on my taxes, because I pay development charges towards the landfill facility. It's double-dipping; it's double counting.
The last item I want to speak to you on is one that I guess from an industry perspective troubles us the most, because with the current downloading from the province, transit has become one of the aspirations of all of the planners. Everyone wants to create a transit split in the suburbs of 30%, 40%, 50%. The vision is, everyone will ride the bus. We have enough trouble trying to make transit economically viable in Toronto, where you have tremendous density. I don't believe there is a municipality outside of Toronto that runs a transit system that is not a significant drain on the financial resources of the municipality.
The decision to have transit grow and to become a big part of growth is something that the municipality and the taxpayer need to consider carefully, because if you build it, someone has to pay for it when the growth stops. That's the part that is not in this entire process: that as growth stops someone has to pay to run these facilities. That is what no one is looking at today.
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We believe that transit should be moved as a soft service. It's not a hard service. It's not like a road, it's not like a sewer, it's not like a water line. Transit is no different from a recreation centre, from a park. It's a true soft service and it should be funded 50-50 by the municipality and by growth, in terms of the outstanding growth.
In summary, we have to look back at what has happened with development charges. In our industry and in our economy everyone is struggling to find a way to reduce costs; we're struggling to find a way to do more with less dollars. If you look at your paycheque, if you take home the same gross pay you did three years ago, you sure don't take home the same net pay any more. Every year it erodes further. We cannot have municipal development charges, regional development charges and hydro charges continue to rise unnecessarily and take away the opportunity for growth in this province.
We believe that Bill 98, as proposed with the amendments before you, will ultimately set a tone for development charges which will be more equitable and more appropriate for the future.
Again I want to just focus on the last five items:
Municipalities must participate at a minimum rate of 30%. I think it should be more than 30%, but I don't think anyone will accept a level of more than 30%. But 30% participation, whether you call it copayment or whether you call it discount, is tightening the belt. It's what you at a provincial level are doing and nobody else wants to do.
Clear, transparent accounting is critical.
Use of the appropriate service levels, which is already in the act and we believe is one of the benchmarks in terms of development charges that will work in the future.
Control of costs of transit and ensuring that transit is moved to a soft service.
Last is the deletion of waste and hydro from the Development Charges Act, as those facilities are rate-driven and should not be part of the growth calculation.
With those items, I conclude my presentation to you and I would be pleased to answer any questions you may have.
Mr Pouliot: Mr Fasken, welcome and thank you. In retrospect, I'm happy I didn't have the means to purchase a residence in 1989 or 1990, as your chart indicates. As you make use of the chart to convey the message and tie it up with the charges since 1990 -- the limited span. The time period is condensed. I'm just wondering if since 1990 is somewhat abnormal, given the conditions that prevailed in 1990, where people were flipping houses and it had gone up in excess of 30%, as your chart indicates for the Toronto area, a better representation perhaps would be a longer time table, for our benefit, to make the case. I'm not saying that this is distortion, but it is unusual.
Mr Fasken: I agree with you. I think if you went back to 1983, houses today are selling for the same price that they did in 1983, but development charges were probably between one tenth and one third of what they were in 1990.
Mr Pouliot: You've mentioned what are soft costs vis-à-vis transportation, and you point to others' inability to control costs: municipalities. Many municipalities, I think you will agree, have done a lot of good work. Property taxes have not increased in the past several years in some cases, so obviously it would seem the result of belt tightening.
On transportation -- you're comfortable with that subject matter, I take it? -- public transportation.
Mr Fasken: I wouldn't say I am comfortable with it. I have a limited scope of knowledge of it.
Mr Pouliot: I spent four years as the Minister of Transportation with the previous government. I'm not an expert on transportation, but from memory, the province used to pay municipalities 75% of the rolling stock, the hardware. One can make an argument that a subway train is hardware; the rail it rides on is hardware. Municipalities paid 25%. That has changed now. It's not easy.
I'll give you an example of the TTC. It has millions of users per year, as we're aware. At the fare box, the mandate is to get 68%, 68 cents of every dollar. The remaining portion, 32%, is split two different ways: 16 cents by the province, 16 cents by the regional government. If you jack up the rates, you have fewer users. If the recession hits, fewer people need public transit. If you don't do that, you cannot make ends meet. I don't think it's meant to be -- at best, it would be a break-even.
The province still controls 100% of GO Transit. It has an offshore leaseback arrangement because they needed $350 million, and they'll get the property back 15 years down the line. Their responsibility was 70% to be raised through the fare box.
It's difficult. If you want your trains to run empty -- yet public transit is to be encouraged. It's a big, big item. We built the 407. When you say you build it and people will come, it's the busiest highway in North America, busier than Santa Monica. That's costing $1 billion, so you're constantly fighting, trying to reach an equilibrium, like you do between public transit and the opportunity of people to drive their cars as well. It's one or the other. It's not easy.
You would like to know where you stand. Is there something like red tape that bothers you? Do you have the impression as a developer that from time to time you start doing one thing and the regulations or the rules change in midstream and you really don't always know where you stand? Would you like to see some simplification?
Mr Fasken: In the development industry the change is consistent. It has never stopped for us. Development is a moving target, and it always has been.
Mr Jerry J. Ouellette (Oshawa): I'll continue a bit on the transit issue, if you don't mind, but one quick question first. If the government were to pay 75% of the purchase of your vehicle, would you buy a Chevette or a Cadillac?
Mr Fasken: If the government was to pay 75%? I don't think there's any question about that. You scale up, as we see with interest rates today.
Mr Ouellette: I think that's part of the problem with some municipalities. We constantly see that a large component of the busing industry is empty. Do you think deregulation of the bus industry would assist that, to allow a charter service to compete with the municipalities? Also, I hear the same from the municipalities, that they would be allowed to compete with charter services and provide charters. Would that help the industry in that sense?
Mr Fasken: I'm not sure. When you drive down the road and see buses running every 20 minutes with two people on them, I don't think a charter's going to run that route because the money isn't there. You really have look at it and say, what do we really need to provide as a bus service? What do we need to provide as a transit service? Forget about what we decided back when the province funded 75%. What do we need now? What can we as a municipality afford to pay? Not interregional transit, not transit that's going to run from Burlington to Toronto and from GO Transit, because I think there is a market for that to be either funded by private sector or to be run by the private sector. I'm talking about within the municipality. I don't know if there's an opportunity for competition, because the service requirements are so low.
Mr Ouellette: I think that's part of the problem, that Cadillac service is being provided for a Chevette requirement.
Mr Fasken: Exactly.
Mr Ouellette: Why do you think it is, as was mentioned earlier, that some municipalities can survive quite well, are thriving, without development charges at all, yet we constantly hear they'll virtually cease to exist -- at least that's the impression we receive -- if they are discontinued?
Mr Fasken: I think the bureaucracy within the municipalities have adjusted themselves to a lifestyle. It's no different than many of us have found; you're used to having a certain amount of money come in. Many of the municipalities implemented development charges when they were not a legal tool to use. They collected charges and used those charges for expenditures and they've developed a level of service that the public has expected. There are municipalities where the standard for parkland is 40% in excess of the provincial standard. Their decision is, "That's where we want to put parkland." Because they've established those levels of service, they now have to find a way to feed them, and development charges are the only way to do that.
Mr Ouellette: Again, Cadillac service where Chevette service may be required.
Mr Fasken: Maybe it isn't a Chevette, but the question is, what level of service is appropriate and what level of service can you continue to afford, when growth stops, without having to push property taxes up by 10% or 12% per year? That's the part we don't see people looking at effectively. We don't see that long-term cost analysis.
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Mr Sergio: Mr Fasken, thanks for coming down and making a presentation to us. What would be a fair rate that a municipality could charge for various development? What would you be willing to pay?
Mr Fasken: What would I be willing to pay? It's not something you can say what is a fair rate to a municipality. Do you pay the same rate for a $70,000 house in Hamilton when the exact same house in Mississauga is $160,000?
Mr Sergio: Don't let me lose my second question, please. I don't want to cut you off. Are you saying that binding legislation for the entire province is not advisable?
Mr Fasken: Are you saying a fixed fee, a fixed development charge province-wide?
Mr Sergio: That's right.
Mr Fasken: I don't think it's equitable, because percentages for costs of land, costs of housing, vary so dramatically. You pay the same development charges today on a $1-million house as you do on a $120,000 townhouse.
Mr Sergio: So it would be better if individual municipalities, according to their own needs and demands and whatever, should be setting their fees, together with the industry.
Mr Fasken: That is what this act will allow to happen. Municipalities will have to look back at what their level of service has been for the last 10 years. I think for the first time it should go back 15 years, because we have to get over the excesses of the last five in terms of upgrading service levels.
Mr Sergio: We have heard other deputants in the last couple of days saying: "No matter how much the fees are, we are just collectors. At the end, there is one user who is going to pay the whole shot." Is that true?
Mr Fasken: That's correct.
Mr Sergio: I'm not being fair with my question, but what's your beef if the end user is paying that particular fee? You're not defending the end user. I haven't seen one developer, I haven't seen one UDI member, I haven't seen one chamber of commerce defending the end user.
Mr Fasken: Why do you say that? That's an interesting comment. The issue with development charges is that they have a direct effect on the end price. When your market moved down from 1990 to 1996, when you saw a 30% reduction in house prices due to the rather unstable market --
Mr Sergio: I have another important question.
Mr Fasken: Let me finish. Did development charges drop, reduce to reflect the market? Did municipalities look at it and say, "We're interested in helping the purchasers, so we will cut our charges?" I want to give cities like Hamilton credit, because they did that.
Mr Sergio: A lot of municipalities did that.
Mr Fasken: A handful of municipalities did it, yes.
Mr Sergio: A lot of municipalities did that. If a lot of municipalities did that, why do we need today such blanket legislation that forces municipalities to do what the government wants and not leave it according to their own needs? If they don't deliver good services it's not a good government, right?
Mr Fasken: No, I don't agree with you.
Mr Sergio: Let me get to my question, please. You're saying hard services: sewers, water. You didn't even say transportation. Are you saying that a roads provision is not a hard cost?
Mr Fasken: No. Clearly the issues that the minister has outlined in his most recent revision to the act represent hard services: water, sewer, storm, sanitary.
Mr Sergio: You recognize that too.
Mr Fasken: Absolutely.
Mr Sergio: An existing community should be paying for street lighting in the new subdivision, hydro?
Mr Fasken: No. We, as an industry, install the street lighting.
Mr Sergio: You do?
Mr Fasken: We do. Today under all new municipalities, when we develop a subdivision we install the street lighting.
Mr Sergio: All right. If the new community which you're proposing to build will avail itself of the amenities in the established community and new amenities have to be provided in the new community as well, do you think that people in the older community should be paying for those services in the new community?
Mr Fasken: I think the community in a broad sense should pay those costs because you cannot differentiate, from a property tax perspective, between someone who lives in an old community who didn't pay development charges that has those facilities --
Mr Sergio: What do you mean, "They didn't pay development charges"? I don't understand.
The Chair: We're going to close with this answer, please. You may finish.
Mr Fasken: You cannot differentiate an existing development that already has libraries, already has the services, has the roads, has the transit systems but does not pay development charges. In a new community the existing act charges people for all those charges but they pay the same level of property tax as the balance of the community.
The Chair: We must move on. Thank you, Mr Fasken. We appreciate your taking the time this afternoon to bring your views to the committee.
UPPER CANADA PLANNING AND ENGINEERING CONSULTANTS
The Chair: We would next like to hear from Upper Canada Planning and Engineering Consultants, Mr Hodge. Welcome.
Mr Richard Hodge: Madam Chair, committee members, good afternoon. My name is Richard Hodge. I'm president of Upper Canada Planning and Engineering Consultants. Our firm was originally incorporated in 1975 and provides planning and engineering services to both the private and public sectors. Approximately 70% of Upper Canada's work is derived from the private development industry. We process in the range of 60% to 70% of all the development projects in Niagara, so I'm completely familiar with development in Niagara. Being one of the original principals, I have practised for over 22 years in the development industry, and during that time I have seen our industry go from no development charges to the current system.
Prior to development charges, if a developer wanted to develop and the infrastructure wasn't in place, they either had to wait until the service was in place or put up front all the necessary costs to put the services in place. This resulted in delays in our industry and in many instances also resulted in the first developer paying for all the infrastructure costs, with the rest of the developers in the area riding on the first developer's coattails and no way for the first developer to recover his costs. This process not only resulted in long delays but it was totally unfair.
It appeared that when development charges were first introduced, there would be a system in place that would allow for upfront cost-sharing and a mechanism whereby municipalities could over time obtain funds to pay for the development-related portion of their infrastructure. In theory, development charges appeared to be a good thing. In reality what happened was that municipalities used the development charge as a way to obtain funds to upgrade their existing infrastructure and/or improve their existing levels of service.
As far as accountability by the municipalities, simply put they can work their numbers to show whatever they want, and in the past they have been very successful at collecting moneys for non-growth-related portions of their infrastructure and have not, to date, shown any accounting with respect to what the funds were collected for or where the money was spent.
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Therefore I believe that the two key items that must be strongly and clearly addressed in the new act are:
(1) That the development charge costs apply to the growth-related portion only -- in other words, not for upgrading existing services or fixing existing problems;
(2) There must be documentation and accountability for what is collected and how it is spent.
On the first item the act appears relatively clear. However, we haven't seen the actual regulations yet, even though I understand that they are out now, so we don't know how much weight they will carry.
On the second item, or at least until last night when I was surfing the Web and went to the Ministry of Housing, I thought the act had the right idea: Let the taxpayers ensure accountability by forcing the municipality to pay a share, the idea being that if they gold-plated the services too much, and with their nominal share of 10%, the result could raise taxes, and instead of one or two developers getting upset, hundreds of taxpayers would be affected.
The theory is sound. However, it appears as if this, in my opinion the single most important provision in the bill, that of assuring accountability, is going be removed. In my opinion, the removal of the 10% share will also remove the accountability the development industry needs to ensure proper allocation of the development charges. Unless the municipalities share in the cost of development, there is no mechanism in place to ensure the funds are properly allocated and the services are not gold-plated. With the loss of a large portion of our industrial and commercial tax base, the downloading of services by the province to the municipalities and our aging infrastructure, now more than ever there is a need to make the municipalities accountable.
While I feel these are the major issues, I have a few others that concern me a little bit. We'll see what happens with them when the bill is finally passed. Niagara is different. We're not the same as the GTA. Our land area is larger, our population is considerably smaller -- in fact it's less than Mississauga alone -- and our land values and final lot sales are substantially less than in the GTA. This in itself is not necessarily a problem, but what happens is that municipalities compare their development charges to those in the GTA municipalities and they think we should be charging the same thing. The fallacy in this thinking can best be demonstrated by the following example:
If you were to take a 40-foot lot in the GTA at a per-frontage-foot sale of $2,500 per lot, the total lot cost would be $100,000, with a development charge of $15,000. That would represent 15% of the cost of the lot. In Niagara the same lot is worth $900 per foot frontage, or $36,000 a lot. If you were to use the same development charge of $15,0000, that would represent 42% of the cost of the lot.
In Niagara the actual development charge, on average, because as you know we're made up of many municipalities, is around $7,000 per lot, or approximately 20% of the total cost of the lot. If you say it really fast it doesn't sound too bad, but on top of that, if you add all the processing fees now, because the municipalities are charging a fee for everything including amendments, additions, changes, whatever, and park dedication costs, in some municipalities these costs can be as high as $4,500 per lot. These fees, combined with the development charges, would result in approximately a third of the cost of the lot. If you take this scenario one step further and you add in the rest of the costs, with land at $8,000 a lot, servicing at $15,000 and the soft charges we just discussed at a total of $11,500, that results in a total cost of $34,500, not including profit and carrying costs.
I've rounded these numbers out for simplicity's sake and they vary from municipality to municipality, but in general they're relatively close. You can see that the difference between the $36,000 and the $34,500 doesn't leave a lot.
One of my other concerns is transit. It was interesting to hear what I did when I walked in on the last presenter. I have some real concerns with transit in Niagara. If transit is included in the development charge, I could see the region looking at it on a regional basis. I already see buses in St Catharines and Welland driving around empty. My real concern is that they're now going to be driving between Welland and Fort Erie and Port Colborne empty. The low ridership and the high costs to maintain a transit system could result in a further substantial increase in the development charge in Niagara, so I have a real concern about transit. I'm trying to make the point here that Niagara is different from the GTA.
There is a great concern in our industry that we're already at a break-even point. I have clients who are developing their land and trying to sell the lots just so they can get rid of the land because it's killing them to carry it, not because they're making money on the land.
I have concerns. I've got an example of a development charge that was just passed in spite of the fact that there's a moratorium on new charges. In their brand-new bylaw they have charged for roads, bringing them from rural to urban standards; nothing to do with development, not development-related at all. These are the kinds of things that the old act seemed to allow. Maybe legally it didn't, but they still did it.
Those are the points I have. I don't think I took half an hour but I'd like to thank you for providing me the opportunity to air my thoughts and concerns. I hope you will seriously consider some of the points I've made today. As I say, I was shocked last night. I had this thing half-written. I had to change some of it because I realized for the first time that the government was thinking of getting rid of the 10%. I don't know what to do. I don't know how you're going to make these municipalities toe the line, because they think this development charge is a developer's credit card and they don't have to pay the bill.
Mr Hardeman: Thank you very much for your presentation. First I want to go to the issue of your concerns with equality between the GTA and Niagara region and your analysis that if development charges were the same it would be unfair in Niagara because of the different values in the two areas. My concern is, why would we, or do we in this bill, assume there is anything in there that would imply that municipalities could set their development charges based on what is being charged in the GTA?
Mr Hodge: There probably isn't anything there that implies that, but they do it. It's just human nature to look at your neighbour and see what he charges. If he charges more and there's the possibility that you can get more when you're already struggling to keep your taxes to zero -- as we've heard, they've been very successful at it. Part of the reason is that they've been charging the development charges and applying the costs to existing services.
Mr Hardeman: But you would agree then that if there is accountability built in, they have to, first of all, justify what they're charging for, and second, they have to account for the money they charge, that it is being expended where it's supposed to be, that this would solve that concern.
Mr Hodge: It would. My concern is, how do you make them accountable? Making the taxpayers watch them is a good way to make them accountable.
Mr Sergio: They are now.
Mr Hardeman: The other issue: When the minister made his presentation Monday morning concerning the bill, he mentioned that he would be recommending that we remove the 10% payment on behalf of municipalities for what he called the hard services. One of the reasons he gave was that these are very difficult to gold-plate. Obviously, if development is going to pay for the cost of development, you can't put in 90% of the sewer pipe; it has to be the whole pipe. Municipalities tend to do that in a most cost-effective manner, so he felt that it wasn't as important, that further accountability was built in that as there would be in the soft services. Would you disagree with that?
Mr Hodge: Based on my past experience, yes. I think they can gold-plate anything. They can gold-plate a sewer as well as they can gold-plate a city hall. You just put more bedding; you increase your standards.
Mr Hardeman: The other issue was more from the previous presentation -- I believe you were present when it was done -- when they talked about the 30% and that it was very important that it was left in but it wasn't critical whether that was a copayment or a discounting. Obviously the discounting portion of that is different from a copayment. When they've set the charge and they can provide it for 30% less, they would not have to put any municipal contribution towards that. Do you see those two issues as being the same, as the previous presenter did, or do you see that it's important one way or the other that they be differentiated between?
Mr Hodge: You know, Mr Hardeman, I haven't really thought about that. My first reaction is that it stay the way it is. I have some concern with the municipality being able to say they've contributed something that would keep the cost of it down and that would be their share, again based on past experience.
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Mr Hardeman: Municipalities have come forward and told the committee that they have real concern with the copayment if it doesn't include the discount. If the study is done and it says they have the right to charge $100,000 divided over a number of homes for a service, and then they can provide that for $70,000, they should not then be obligated to provide 30% of that $70,000; they have reduced the level of service or the cost of that service.
Furthermore, some municipalities, and this is particularly true in the Niagara region, where they've done their studies and they have the right to charge a considerable amount of money more than they're presently charging, don't feel it's appropriate then, when they do that, that they also have to make up a percentage of that lower amount when they actually construct the facilities. Do you have any comments on that?
Mr Hodge: If it's done fairly, I don't have a problem with it. My concern is that some will do it fairly and others might tend to abuse it.
Mr Ouellette: You mentioned accountability. This was brought up on Monday and I think it was an interesting point. I found it so, anyway, so I'll mention it again. Do you think it would become more accountable if the end user, being the purchaser of the property, were to pay the development charges to the municipality as opposed to having the developer pay them?
Mr Hodge: Sorry. Say that again.
Mr Ouellette: The home purchaser pays the development charges to the municipality as opposed to the developer paying them. The developer is just the middle person. Would that make it more accountable?
Mr Hodge: Yes, but it's after the fact. He doesn't have an opportunity at that point in time to say: "Wait a minute, I don't need all those services." It's done. It's a done deal.
Mr Ouellette: So you're saying it wouldn't make it --
Mr Hodge: I don't think it would. I think it's too late.
Mr Ouellette: Well, they would certainly have to justify the cost, I imagine.
Mr Hodge: You might have one guy at the counter at a time screaming upset sort of thing. I don't know. I think it's too late, though, at that point.
Mr Gerretsen: I get a little disturbed when I hear all this talk about accountability, as if municipalities aren't accountable at all. After all, they face elections every three years and it has been my experience that the development and housing industry probably finances more local campaigns than any other one single group. I'm not saying that necessarily in a negative sense, because I've had the benefit of that over the years as well, as have others who are probably sitting around the table.
Interjection.
Mr Gerretsen: Oh, you don't really know, Gilles; maybe you have.
Surely the ultimate accountability is at the ballot box every three years. The last comment that you made you somehow seemed to back away from it a little bit by saying, "Well, yes, some municipalities are fair and some aren't." I would suggest to you that some developers deal with the municipality in exactly the same way. Some of them come straight up front with an idea and with a sense of fairness, and others try to take advantage of a municipality whichever way they can. I can give you a few examples of that too if you'd like. I don't know where it gets us by dumping on one group and saying: "These people aren't responsible. The municipalities don't know what they're doing." Is that the way we should be building laws or rules and regulations?
Mr Hodge: Probably not. I have a problem with that too, I must admit. You're absolutely right. If you look at today's subdivision agreements, they're probably this thick, and it's as a result of one or two bad eggs and not the whole basket. It's unfortunate that we have to do that.
Mr Gerretsen: Exactly, because you and I know there are subdivisions that were built in the 1960s that were built very substandardly, with not enough of a road base, not enough services put in the ground etc. Who's paying for all those services right now? The municipal taxpayer, because somebody didn't play the game in a fair way a number of years ago. All I'm suggesting is that it works on all sides.
Mr Hodge: I'd like to address your question on accountability, because I'm not sure the accountability issue works at the voter level when it comes to development charges. It probably works in favour of the politicians, because the more development charges they can collect the better off they are and the lower they can keep their taxes, which makes them look good to the voters. If they were all developers instead of taxpayers, then you're right, there would be accountability, but they aren't; only one or two or half a dozen are developers.
Mr Sergio: I have a question also for you. Last week during the last rainstorm, 90% of the homes in your neighbourhood got flooded basements. This is not the first time. This has been happening practically every time it rains. You living in that subdivision there, you're fed up and you call the local councillor and you call the mayor. They allowed a subdivision to be built a mile up the street from where you live knowing full well that the new subdivision didn't have full sewer capacity to absorb the 200, 300 or 400 homes, whatever. Now you're suddenly very upset with the mayor and the local councillor; you want something done. The sewer capacity has to be increased in your community. Otherwise, you're going to get a flooded basement every other day it rains. Who is going to pay for that?
Mr Hodge: Let me address the concern first, because not knowing exactly the situation you're talking about, I do know of several situations that sound the same but are as a direct result of increased standards by the Ministry of Environment getting rid of all of our sewer overflows. So every time it rains now, we have problems. I ask you, is that the responsibility of new development? I'll put it back to you --
Mr Sergio: I also said in my question that you knew it, the mayor knew it, the local councillor knew it, that they allowed a new subdivision to be built with undersized services. That established community has to pay because of the consequences of building a new subdivision. What I'm trying to say with my next question is, if your new site infringes on the abutting community there, who should be responsible for providing the necessary services so the established community does not suffer the consequences of an extra 500 homes up the street?
Mr Hodge: I could take a long time to answer that.
Mr Sergio: Well, give it a try.
Mr Hodge: First of all, and it was discussed with the last fellow as well -- actually, Monty is sitting back here, and he and I were discussing this upcoming meeting. I said to him, "Well, gee, you know, I have a hard time going in front of that committee when I really don't believe in development charges, the philosophy of it, period." Monty said to me: "Well, it's kind of like the genie is out of the bottle. You're not going to get him back in. Let's just try to limit him to three wishes."
Development charges, in my opinion, quite honestly, are an unfair tax on the new home owner. I can get into this philosophy if you like. My father paid taxes for new growth, and as a result of it, my house was cheaper. My kids are going to pay more for their housing because we're putting a special tax on.
Mr Sergio: So you're just a collector, right?
Mr Hodge: Who?
Mr Sergio: You, a developer. You're just a collector.
Mr Hodge: I collect it and pass it on. Absolutely.
Mr Sergio: Exactly.
Mr Hodge: With no opportunity for the fellow who pays it to have input as to how much it has cost or what it's for. None.
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Mr Sergio: Is it fair for you to pay now, let's say, part of $2 million because the city has to improve services? Is that fair?
Mr Hodge: If it's development-related under the act, absolutely. Not a problem. I don't have a problem with that. Look at this. Most of this one, and I can show you several others, goes for nothing other than fixing existing services.
Mr Sergio: You never got a flooded basement until they built 1,000 homes a mile from where you are, because the sewer capacity is not enough. Why should you? That's the point.
The Chair: Excuse me. Mr Pouliot is anxious for his time.
Mr Hodge: I could give you another example. We just built a brand-new subdivision. The basements flooded.
Mr Sergio: In the new subdivision?
Mr Hodge: New subdivision. The town's existing sewer was draining half the creek. The pumping station couldn't take it. Is that the new development's fault?
Mr Pouliot: Can we get out of the sewer? It's my time.
The Chair: Go ahead, Mr Pouliot. You have the floor.
Mr Sergio: There must be something wrong if it's a new development.
Mr Pouliot: Mr Hodge, my colleague mentioned being the recipient of a political contribution. I have never --
Mr Froese: You've never gotten one.
Mr Pouliot: When my phone did not ring, Mr Hodge, maybe it was you calling. I managed to survive four elections. A much-maligned group they are, the women and men who serve at city council. There are more than 800 municipalities across the province, and you know many of them, I'm sure, through your expertise. I too, because of this, have had the same opportunity for travel to many of the municipalities. What I see is a desire to meet the standards, and those standards do change; it's evolutive. What I see is good, by and large, basic service. Gold-plated? We're not talking about an MP's or an MPP's pension here; we're talking --
Interjection: Not ours.
Mr Pouliot: Not ours any more. We're talking about basic service in municipalities. You've mentioned, and I'm quoting verbatim, with respect, "I don't know how the government will make the municipalities toe the line." Well, they're about to toe the line big time, because within a year's time they will be responsible for a range of service. The portables that were to be temporary, is that gold-plated? Miss Jones, who needs medication and who has to wait three months for a hip replacement, is this gold-plated? The list goes on and on, Mr Hodge. So when we impute motive, when we say, "I'll show them how to tighten up their belt," and we go and see them and they give us the assurance that they've already gone beyond the call of duty, what more?
Would you be better off if it was called a tax, not a development charge? Would that make you feel better? For instance, a building permit would cost you the same amount of money as a development charge. Would you feel better? By way of a question, sir, what assurance do I have as a consumer that all of the benefits will be passed along to the marketplace so I, the consumer, will benefit from the lack of development charges at the builder's level?
Mr Hodge: I guess the same assurance you have when you go and buy a suit or a toaster or anything else: the market itself. I'm not suggesting to you for a moment that developers, toaster makers or tailors shouldn't make money. I have to eat, you have to eat; I've got children --
Mr Pouliot: Stop there.
Mr Hodge: Stop there? Okay, sorry.
The Chair: Thank you very much, Mr Hodge. We appreciate your taking the time to come before us and answer questions and present your views.
Mr Hodge: Thank you for the opportunity.
MOUNTAINVIEW HOMES LTD
The Chair: We would now like to welcome Mountainview Homes, with Mr Basciano, please.
Mr Monty Vandeyar: Madam Chair, Mr Basciano has not been able to appear here today. I'll speak on his behalf.
The Chair: That's fine. Please make yourself comfortable. Introduce yourself for Hansard record, please.
Mr Vandeyar: My name is Monty Vandeyar. I'm a practising solicitor in this area and the in-house counsel to Mountainview Homes, and as such, I've been actively involved in the company's response to the many bylaws that have been enacted under the Development Charges Act in the Niagara region. I have to say that I have found quite a lot of the bylaws deficient, not because the act purposefully is misguided, but rather, the way it has been implemented seems to be the problem.
I would like to start by thanking you for allowing us to present our views here today and having this hearing in this area, because it allows us an opportunity to tell you exactly how we feel about the present act as it is and what the new bill is likely to do to it.
By way of introduction, let me also say that Mountainview Homes has been a developer and a builder in this region since 1979 and presently has several undertakings under way in at least nine of the 12 area municipalities. I can proudly say that it is indeed one of the largest home builders in the region.
At the very outset of my submission let me clearly state that Mountainview Homes supports the development charges as a means of allowing the municipalities to recover the costs they incur to provide services resulting from new development. Prior to the enactment of the Development Charges Act in 1989, our company recognized the growing demand for services such as neighbourhood parks in the areas we were developing and the inability of the local area municipalities to respond to those demands. As a result, we have of our own accord paid for neighbourhood parks in the city of St Catharines, in the city of Thorold and made substantial capital contributions in the city of Thorold towards its library service. Very recently, we made some $32,000 as a contribution for the improvement of a neighbourhood park in the town of Lincoln.
At first, when we looked at the Development Charges Act in 1989, we saw it as a means of bringing certainty and uniformity to a previous practice, the lot levy practice, as it was called, that seemed to vary from municipality to municipality and, not uncommonly, from project to project within the municipality.
Unfortunately for us, we find that municipalities have seized upon the broad wording of the present act to require the development community to pay for almost all their services, which they've set at very high levels, seemingly free of charge to the general taxpayer. Much to our chagrin, we've noticed that the Development Charges Act itself provides no explicit requirement for a municipality to exercise this right to charge a fee with any corresponding duty. By that, I mean the duty to provide only what is needed rather than what is desired; the duty to provide services at a reasonable level rather than the elevated levels it has chosen; and the duty to consider the long-term impact of maintaining and replacing those services that have been funded through development charges. In short, there seems to be no real mechanism in the act that would make a municipality accountable for either the range of services or the level of services it wishes to provide and the eventual impact this will have in operating costs to the general taxpayer.
To illustrate this point, let me relate to you a particular experience we've had with regard to the deficiencies in the present act. In 1990, we challenged a development charge bylaw in one of the area municipalities. This was a predominantly rural municipality with less than 17,000 people. We challenged this on the basis that this bylaw merely provided for soft costs, soft services; there was no attempt made to provide for any hard costs or hard services. This in itself was singularly shortsighted as an exercise. Nevertheless, we referred this bylaw to the Ontario Municipal Board on the grounds that the total charge that the development charge represented was high and incorrectly calculated. We argued that three of the service categories involved in the total eight were wrong. If you talk in terms of the sum of the parts equalling the whole, if any part is wrong, therefore the whole has got to be wrong.
We argued at the municipal board, and the board held that the act itself did not require the municipalities to set out their charge in a component fashion, so that even if any component was wrong, provided the total charge was lower than what it might otherwise have been -- on appeal to the Divisional Court, it upheld the board decision on the grounds that both the act and the regulations did not require the municipalities to set out in a break-down fashion various amounts that made up the charge.
Since then, I can tell you that this municipality has enacted a second-generation set of development charge bylaws that now awaits ministerial approval. In the meantime, these new bylaws represent probably the highest development charges in the region.
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As a result of our experience, we're now looking to Bill 98. It is our view that this bill appears to bring a needed measure of accountability to the way municipalities calculate the development charge that seems to be missing from the present act. We strongly support the provisions of Bill 98 in that it will obligate the municipalities first to contribute towards the cost of the services from the general tax base and it will also obligate them to confine their charges to a range of eligible services, obligate them to limit the services to a 10-year historical average and obligate them to consider the long-term impact of operating those services that were funded by the development charges.
Having said that, we do have some reservations about Bill 98 in that it does make provisions for an item called transit as an eligible service. This service is likely to be provided in the Niagara Peninsula by the regional municipality. This will be on a region-wide basis and the charge is likely to be a flat-rated one. Some areas have smaller populations in the Niagara Peninsula, and therefore not all of them will enjoy the benefits of the service because of the low per-capita use the service will provide them. In our view, if that is a comment we are allowed to make, the service is better financed through the general tax base and therefore should be eliminated from Bill 98 as part of the eligible list of services that a municipality ought to provide. Likewise, we say the same for solid waste. This service is better financed on a user-pay basis, and we believe that service on a use-pay basis complies with conservation too.
Having said this, we believe, and I say this very sincerely, that all together these changes will likely protect the future and the existing taxpayer and also lower any barriers that the housing market will have and render it reasonably affordable in the near future. Those are my short submissions.
Mr Sergio: Thank you very much, Mr Vandeyar, for coming down and making a presentation to our committee. I want to take you back to the four recommendations you have made that you think that municipalities should or shouldn't do. In (b) for example, "to confine its charges to a range of eligible services," what would you consider good services that a local municipality should provide? What services would you include? A skating rink, let's say?
Mr Vandeyar: I don't think I would want to list them and say to you that these are the services that a municipality should provide and bury it in the act. All I'm saying is that the municipality, as it must in the bill, designate the services it will provide that it hopes to finance through the charge.
Mr Sergio: On (c), you're saying "to limit the level of such services to a 10-year historical average." I believe you would find most municipalities agree with that, provided -- as you know, municipalities get their rations from Big Daddy.
What would happen if we have such an agreement in a particular municipality and they hold the line, don't build a new Taj Mahal, as it has been said, don't fix any more sidewalks or whatever? They have two things to do: either raise taxes to maintain the existing infrastructures or let them go, let the services run down.
What happens in the case where you have Big Daddy, the government, go to the local municipality and say, "I don't want to be responsible any more for long-term care, so, municipality, you look after it," or municipal housing or other infrastructures? What happens then to local municipalities? Where are you going to apply this 10-year average when you have a government that says, "Municipality, now you are responsible for providing all of that"? What are you going to do with that?
Mr Vandeyar: To try to answer your question, I believe municipalities presently offer a level and a range of services they can readily go back to and say, this is the level on an average 10-year basis. All I'm suggesting as a departure from that is that if the municipality is allowed, as somebody suggested here, though I don't like the term, to gold-plate it -- let's say they did want to increase that level of service. That should be a decision that is made throughout the municipality and the cost should be borne from the general tax base, because nobody individually or no new homeowner alone is going to benefit by that improvement.
Mr Sergio: But I'm talking here about building nothing else; the municipality is doing nothing extra. But all of a sudden, out of the blue, we have a new election and a new government, and that new government happened to promise gold-plated whatever you want to call it to particular groups and now wants to unload on the local municipalities the expense of getting those dollars they promised to somebody else. Do you think the local municipality should be burdened with those?
Mr Vandeyar: The attempt I see in what you say is that there seems to be two sets of tax base here. There is the new homeowner, who apparently is not counted in the decision-making process. When he pays development charges, as you know, he sees it as a hidden tax that's built into the price of the house he buys. He has no say in that. To that extent, he is the silent taxpayer.
Mr Sergio: Yes, but I'm now talking about this 10-year average agreement, in which a municipality very diligently wants to listen to Big Daddy and says, "We understand what you want to do and it's fair, blah blah, blah" and they have this 10-year average. Then all of a sudden, out of the blue, they are getting downloaded from an upper-tier government extra charges, which they were unprepared for, unbudgeted for, and all of a sudden that 10-year average has gone out of the window. What happens to that municipality? What happens to that 89-year-old woman or man who can't afford to pay extra for the downloading of responsibilities on the local municipalities?
Mr Vandeyar: If the infrastructure has to be maintained, I'm saying the burden is going to be -- I seem to come back to what I thought was your question or your distinction. The taxpayers are always going to be the same, whether it's the new taxpayer or the old taxpayer. The new taxpayer pays two costs: He pays the initial capital costs through the development charges for having come into the community; then he continues to pay when he's in that community as the general taxpayer, so he's no different from anybody else. If the municipality is burdened, as you say, from the downloading, the burden is still throughout the municipality. It has nothing to do with the development charges or the fact that a new person has moved in. New development didn't cause the problem.
Mr Sergio: We understand that, but then the 10-year agreement is really not a valid argument, is it?
Mr Vandeyar: Oh, I don't think that's the case. I think the idea behind setting the limit is to say that if you have the right to charge, you should have the corresponding duty.
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Mr Pouliot: Mr Vandeyar, if you exclude -- suffice it that the development charges are no longer the order of the day. A person is an established homeowner in the municipality and a new subdivision is being developed. The money obviously will, it is highly likely, come from the general purpose fund, will come from general taxation, so it would be fair to say that the established resident is subsidizing, is certainly contributing to, the cost of the new subdivision. Is that not the case if you don't have a development charge which is dedicated for that cost, if it's passed to everybody in the municipality?
Mr Vandeyar: With the greatest respect, Mr Pouliot, I believe, and my experience has borne me out on this, that every subdivider is called upon to develop his subdivision and has to finance the entire infrastructure within the subdivision. I think the services that municipalities usually find a burden are the existing services that have to be expanded as a result of new people coming in and using what's there. Development charges -- if a road has to be widened, to the extent that the new people who have moved in have contributed to the demand for that service, they will be paying the cost.
Mr Pouliot: For some it's an ongoing challenge, which is the choice, subject to change, between user-pay and the collectivity, if you wish, that we're all responsible to one another. Examples abound. We're all on a waiting list of sorts, of course. If somebody hits a difficult time and ends up with a stay in the hospital, I think we all understand the need for the collectivity to get involved. We do that through our tax dollars and expertise. By the same token, if we don't use the ski hill or the curling club, we acquiesce, if not readily. You would certainly say: "If you use the curling club, maybe you should pay a little more. I'll pay part of the electricity bill through general taxation" and so on. That's always difficult and it always changes, and I think that's okay too, to keep trying to reconcile the bottom line.
I have a question for you. You've mentioned downloading. Let's say municipalities are forced -- the likelihood is real -- to take on new and additional responsibilities. The reason I'm asking the question is because I'm concerned and nervous about standards, that if you don't send the cheque, you can have all the legislation and regulations you wish, but how do you maintain the standard when the cheque isn't in the mail or the ability is not there for local government to pay for the service? Is it not an invitation -- without imputing motives -- to cut corners where you can? Is it not a discrepancy between the services you will get in one place as opposed to the other? If you don't send the cheque, "What are you doing in my business?" That's the reaction. When people look at the standards, they say, "Now I'm paying for this, so please, I'll do it my way." Am I too bold? Please correct me if so.
Mr Vandeyar: I must say, I didn't quite follow the trend in which you -- I don't want to attempt to answer a question I don't even understand.
Mr Pouliot: Do you want me to do it? Look, I came to this province to learn English and you embarrass me in front of my colleagues.
Mr Vandeyar: I apologize.
Mr Pouliot: Simply put, do you feel there is a risk that standards could be compromised?
Mr Vandeyar: I think there's a confusion. Standards are something that has been there. I'm simply wanting the municipality to maintain the standards they've had. I don't want them to increase the standards simply because there's now a new bounty appearing.
Mr Pouliot: Thank you. Now it's my turn. I read in your presentation -- I'm supposed to learn English: "Likewise, solid waste disposal service is better financed on a user-pay basis that would encourage conservation practices." I'll never learn the language. Read that.
Mr Vandeyar: What I'm saying is that the solid waste, as a service, should be treated very much like the way I've suggested transit should be, because transit doesn't readily allow itself to be financed through development charges, in our view. We think it should be part of the general tax base. All taxpayers use it and therefore all taxpayers should pay for it, and if it was regulated on a user-pay basis, conservation therefore would be the first thought in all our minds.
Mr Pouliot: We already meter the water coming in. Now you want to meter the water going out.
Mr Vandeyar: They do it both ways anyway now.
Mr Galt: Thank you for the presentation. Sitting here observing this afternoon, your peers are staying here to hear your presentation. They had equally convincing presentations, and obviously supporting each other. What a shame that the municipal councillors, who made their presentations this morning and who were equally convincing in the other direction, wouldn't be here to hear yours. There was a bit of a discussion at noonhour that we should make sure that all delegations stay for the whole day. They can go through purgatory the same as us.
Laughter.
Mr Galt: But seriously, it's unfortunate that they're not hearing your convincing argument. One of the councillors was quite confrontational this morning in his concerns, and I think he might be a little less confrontational if he could have heard what the three of you were saying here this afternoon.
What's going through my mind as you've been presenting is that I'm thinking back to the original act in the 1980s that the Liberal government brought in, and understandably there was concern about lot levies at that time. I'm listening to the presentations over the last three days and I'm starting to wonder, is the Ontario government getting into an area of municipal activity and involvement that they should never have gotten into in the first place?
Mr Gerretsen: Absolutely. I'll concur with that.
Mr Galt: Your government brought it in, so I can understand why you'd concur with it.
I'm curious about whether, with supply and demand and one community lobbying to get development versus another, the Ontario government should have just stayed totally out of this or should get out of it now. I'm looking for your opinion.
Mr Vandeyar: I believe Mr Hodge thought, looking back on the old practice, the old lot levy practice, was perhaps the better way because we negotiated things on an area-by-area, project-by-project basis.
I suggested, and I believe Mountainview is of the view, that development charges brought some certainty and uniformity. That's what we want, because when we develop, these are long-range plans being made; we want to know what the bottom-line cost is going to be to us too. In order to do that, we wanted that certainty, but now that, like Mr Hodge has said, the genie is out of the bottle, what do we do? I, in a jocular way, suggested to him that perhaps we can restrict the genie to granting no more than three or four wishes.
What I was really getting at is that since we now give the municipality the right to levy these charges, we should give them the corresponding duty, like every right should have: How do you account to everybody for the power you now have? I am suggesting a mechanism which I believe is in Bill 98 already: Contribute some of it, and that way you'll have that ability to answer to the taxed public, be it the new owner or the old owner, because it's his money you're spending as much as the new fellow's. That is the point I am getting at.
If you'd keep them accountable for the level of service and nobody tends to overspend or decides to gild the lily, as they say, and let's get along with what we have, we can moderate things. That's the mechanism I am suggesting and looking forward to in Bill 98.
I am suggesting that we should have it go forward on that basis. I was a little concerned that the 100% recovery costs that I thought was going to be reduced to 90% in Bill 98 is now being rethought. We are a little concerned about that. I still think there should be some built-in mechanism that will make the municipalities think twice at least before they spend money or decide on a capital project.
Mr Hardeman: Thank you very much, Mr Vandeyar, for your presentation. You have the distinction of being the last presentation today, in fact the last presentation to the committee before we go back to Toronto.
Throughout the hearings the last three days we've been hearing, particularly from the opposition members in their questions, the fact that any adjustment in the amount of development charges will relate to the municipality's ability to pay for the ongoing maintenance and services in their communities, that there is a connection between the realignment of services and development charges.
If that's the case, would you suggest that in municipalities where that is the case that it's an unfair taxation on the new home buyers; that because they're buying a new home, they're being asked to subsidize operational costs in the municipality? Those questions and types of statements would indicate that that is their position.
Mr Vandeyar: There has been an element of double taxation, if I may say so. When a new buyer comes into an area and pays the certain taxes I referred to, the development charges, he pays for it and that money is used for capital costs of whatever improvements are growth-related. He also, at the same time, is a taxpayer who is contributing to the general taxes, and unless that calculation in the development charges recognizes that and allows for it, you're right, he will be paying twice. He does pay twice, because he pays first for the improvement of the services that we say has been brought on because of his entrance into the municipality, and then he pays for it again as a general taxpayer. Yes, you're right. There are double taxes involved.
Mr Hardeman: Going on with that -- I think Mr Sergio mentioned it -- in the long-term care issue, if municipalities, through the realignment of services, start paying a part of long-term care, the facilities are already in existence. How would you see that development charges would impact that and why they should charge more development charges because they would have more operating costs in their general municipality?
Mr Vandeyar: The operating costs work something like this: First, we put in the services which are funded through the development charges, let's say, for example, a park. If the municipality in its wisdom decides it's going to have this very large sports complex, and it turns out that the need for that park diminishes as the years go by, the cost of maintaining that park, running it and just fixing it up, is going to be borne from the general taxpayer. That is the point I was making, that if we are going to plan ahead and spend this amount of money, we should keep an eye on the long-term costs that we will inherit. I believe Bill 98 does direct us in that direction.
What it says is this: It simply asks the municipality, before they embark on development charges, to have studies, to consider what the long-term impact is before they start putting in these services and charges.
Mr Hardeman: Just one final question on a totally different subject: In the region of Niagara we were told this morning the development charges are about 20% of the allowable amount. According to their study, they're charging 20% of that. Recognizing that, what do you see or how do you see the need for the change? What do you need in Niagara to make it fairer?
Mr Vandeyar: We would like to see some sort of mechanism, as I have constantly said, that will allow the municipalities to measure why they are charging whatever they do. Having said that, from a business point of view, we're always looking to find out if costs can be kept at a lower level. This particular cost, as at least some of the committee members recognize, is actually a flow-through cost, so it's not something that resides with the developer but it will be reflected in the ultimate purchase price and it impacts on the affordability of homes and makes Niagara the viable area it might be.
All I'm suggesting to you is that this decision to increase costs, because we have other services to provide and there's been a downloading, is to confuse the issue.
We simply should tie it in and say if there is growth in an area and the growth is demanding these services, therefore the development charges must be a response to it, but it must be a measured response.
The Chair: Mr Vandeyar, on behalf of the committee members I thank you for coming today to make your thoughtful presentation. It is appreciated.
That concludes our presentations for this afternoon. We'll reconvene on Monday, April 21 at 3:30 in the afternoon.
The committee adjourned at 1534.