1. Council Workshop Presentation June 26, 2017
City of Waterloo
Council Workshop Presentation
June 26, 2017

2. Overview of Presentation
This presentation is to provide Council an overview of the Development Charges Legislation, recent changes to the Development Charges Act due to Bill 73, and the process used in developing the rate calculations
Staff will also look for Council feedback and/or direction around the following areas:
Consideration of Area Rating – Discussion & Polled Question
Discretionary Exemptions – Discussion & Polled Question
By-law Refinements – Discussion
Draft D.C. Rates – Discussion 1

3. Study Process
Meetings and discussions with City Staff regarding Service Standard information and Growth-related Capital needs.
Draft Growth forecast
Policy Review and discussions with Staff
Council Workshop (June 26, 2017)
Finalize capital program required for growth with staff (early July, 2017)
Meetings with Stakeholders (July 26th & August, 2017)
Public Engagement (mid August, 2017)
Draft Background Study and draft by-law prepared (August 28, 2017)
Meeting with Senior Management Team (early September)
Council Workshop (mid September, 2017)
Public Engagement (mid September, 2017)
Final Background Study and draft by-law released to public (end of September, 2017)
Public Meeting (mid October, 2017)
Council Consider By-law for adoption (late November, 2017) 2

4. Purpose
To recover the capital costs associated with residential and non-residential growth within the City
The capital costs are in addition to what costs would normally be constructed as part of a subdivision (e.g. internal roads, sewers, watermains, roads, sidewalks, streetlights, etc.)
Municipalities are empowered to impose these charges via the Development Charges Act (D.C.A.) 3

5. D.C.A. Overview
The D.C.A provided a major change to the D.C.A which resulted in a significant loss of potential revenue to municipalities. The 1997 Act introduced a number of:
Service Limitations
Service Standard Restrictions
Mandatory Reductions
Mandatory Exemptions
Bill 73, passed in December, 2015, introduced further changes
The following provides a summary of the key aspects of the D.C.A as amended 4

6. Limitations on Services
Some forms of capital and some services can not be included in the D.C.A. For example:
Headquarters for the General Administration of the City
Arts, Culture, Museums and Entertainment Facilities
Tourism Facilities
Provision of a Hospital
Parkland Acquisition 5

7. Calculation of D.C.A. (Simplified steps)
Identify amount, type and location of growth
Identify servicing needs to accommodate growth
Identify capital costs to provide services to meet the needs
Deduct:
Grants, subsidies and other contributions
Benefit to existing development
Statutory 10% deduction (soft services)
Amounts in excess of 10 year historical service calculation
D.C. Reserve funds (where applicable)
Net costs then allocated between residential and non-residential benefit
Net costs divided by growth to provide the D.C. charge 6

8. Local Service Policy
Due to Bill 73, “no additional levies” clause (discussed later), a Local Service Policy is required to be developed and approved by Council, through the D.C. study process, to clearly define what developers would be required to do as part of their development agreements versus what would be included in the D.C. 7

9. Exemptions Mandatory exemptions Discretionary exemptions
for industrial building expansions (may expand by 50% with no D.C.)
May add up to 2 apartments for a single as long as size of home doesn’t double
Add one additional unit in medium & high density buildings
Upper/Lower Tier Governments and School Boards
Discretionary exemptions
Reduce in part or whole D.C. for types of development or classes of development (e.g. industrial or churches)
May phase-in over time
Redevelopment credits to recognize what is being replaced on site (not specific in the Act but provided by case law) 8

10. Update on Bill 73 Effective January 1, 2016, D.C.A. changes include:
Transit Services – mandatory 10% deduction removed and basis for service standard measure changed
Waste Diversion – to be included as an eligible service
Ineligible Service definition to be moved from Act to regulations
D.C. Background Studies to examine area rating – also to provide asset management plan for new capital
Annual Report of the Treasurer – increased reporting requirements
No Additional Levies
Minister to have power to impose area specific charges
Housekeeping changes to the Act 9

11. Update on Bill 73: Impact on Waterloo
Need to consider Area Rating as part of the Background Study (but not mandatory to impose)
Consider impact of “no additional levies” in development process / detailed local service policy required to be developed
Asset Management Plan required for all growth related projects identified in the study 10

12. Consideration of Area Rating
Legislated requirements as per Bill 73:
Requires that Municipalities must examine the use of area-rating but is not mandatory to impose
While there are no specific “prescribed” services, this section identifies that the background study must consider this to reflect the different needs for different areas 11

13. Area Rating vs. Municipal-wide – General Perspectives
Charges collected for a service can be spent anywhere throughout the municipality (or service area) without restriction.
A wider collection area results in a larger pool of D.C. revenue that can be used to fund growth-related projects sooner or to minimize the need for debt.
Fewer appeals to the D.C. by-law from developers occur, given their preference for the municipal-wide approach to funding growth-related infrastructure.
Collecting funds in one area and spending in another area may provide a perceived inequity as a result of the geographic separation. 12

14. Area Rating vs. Municipal-wide – General Perspectives
Area Specific:
Defining D.C. collection by individual areas ensures investment of those funds is in the areas where development is occurring.
Infrastructure that is to be funded from D.C.s may be delayed in areas where growth is not occurring.
Higher charge in one area vs. another may impact competitiveness where housing sales prices are similar for competing areas.
Area-specific D.C.s may encourage more development in built-up areas through increased densities and infill as D.C. rates may be lower in these areas.
Area-specific D.C.s increase the administrative requirements for the City related to accounting and reporting purposes (e.g. WW - one pooled service vs. many separate service areas).
Area-specific D.C.s can also increase the complexity where there are differing charges based on the services applicable and/or service areas that a development is located
Area-specific D.C.s may require additional debenture financing as funds are isolated to individual areas thus removing the ability to pool or access other D.C. contributions. 13

15. Area Rating vs. Municipal-wide
Non-Water/Wastewater/Stormwater Services
Services require a 10-year service standard to be calculated to establish an upper ceiling on the amount which can be collected from development. In the case of area specific charges, the average service standard is multiplied by the growth within the area to establish the area specific ceiling which significantly reduces the total revenue recoverable.
Area specific charges potentially cause equity issues transitioning from Municipal-wide to area specific.
Many services provided are not restricted to one specific area and are often used by all residents (e.g. roads, parks, recreation, library, fire, etc.). 14

16. Area Rating vs. Municipal-wide
Water/Wastewater/Stormwater Services
Area Specific charges would differ between services and systems.
Moving to Area Specific may require transition agreements.
For area specific debt financing, slow growth may mean that there is not adequate revenue to pay the annual debt charges.
Increase number of reserve funds are required and result in loss of flexibility to the use of the funds and increased administration.
Increases complexity for local area municipalities
Depending on the range of rates, area specifics may create economic development constraints in some areas. 15

17. Area Rating vs. Municipal-wide
Generally with fewer area-specific charges a municipality is better able to:
Fund its infrastructure priorities from a larger pool of D.C. revenue.
Maintain flexibility and respond quicker to infrastructure needs, (e.g. advance growth-related infrastructure as a catalyst for economic development opportunities).
Be more strategic in its provision of services.
Ensure new growth users of a service, pay their share. 16

18. Area Rating in other Municipalities
There are a number of municipalities that impose area specific D.C.s however for the most part they are related to more localized works for water, wastewater, storm & roads.
Example: City of Kitchener and Region of Waterloo Area Rating:
City of Kitchener D.C.s are calculated for the following areas:
Central Neighbourhoods
Suburban Area
Note: the City fully exempts the Downtown core area.
Region of Waterloo D.C.s are calculated for the following areas:
Cities
Townships
Recently, there are a number of municipalities who have moved from area specific D.C.s to Municipal-wide D.C.s and/or reduced the number of area specific D.C.s by expanding the benefitting service areas. 17

19. Area Rating – Polled Question POLL Question #1 - Does Council wish for staff to explore an area rating DC charge vs the current City-wide rate?
YES NO 18

20. Area Rating – Polled Question
POLL Question #1a
For Discussion:
If yes, which specific areas does Council wish to consider?
greenfield rate vs suburban rate vs core area rate (i.e. how many rates)
station area rates and/or various nodes vs rest of the city rate, etc. 19

21. Proposed Discretionary Exemptions (as per current by-law)
Universities or colleges except:
Development beyond lands designated “Academic” in the Official Plan,
Industrial/research uses on university or college lands where the industrial/research use in the main use, or
Commercial uses
Temporary uses permitted under the zoning by-law
Temporary use of a construction trailer in connection with development construction
A building without a foundation for a period not exceeding 12 continuous months 20

22. Discretionary Exemptions – Polled Question POLL Question #2 - Does Council wish to change any of the existing discretionary exemptions as contained in the current by-law?
YES NO 21

23. Discretionary Exemptions – Polled Question
POLL Question #2a
For Discussion:
If yes, what does Council wish to change/add/remove? 22

24. Refinements to Draft By-law
Multiples: Refined to include back-to-back towns, stacked towns, and residential components of live/work units (each of these also have a new definition based on the definitions in the zoning by-law);
Reset the 50% existing industrial expansion date of Aug.16/99 to align with the Region’s date of Aug.1/14;
Core Area Exemption: Currently the Region provides exemptions to developments in Downtown Core Areas if the local municipality offers an exemption (until Feb ) however, Waterloo does not offer an exemption so this Region exemption does not apply. 23

25. Refinements to Draft By-law
For Discussion:
Does Council wish to discuss or provide direction to staff on any refinements to the draft by-law noted on the previous slides?
Does Council with to discuss or provide direction to staff on any other items not mentioned above? 24

26. Growth Forecast Summary25

27. Draft Capital Costs Summary
Note: Based on Draft Capital Program. Further refinements are currently under review by City staff. 26

28. Preliminary Draft DC Calculations
Note: Refinements to the growth-related capital program will update the draft D.C. calculations. 27

29. DC Rate Comparison – Residential Single-detached Unit28

30. DC Rate Comparison – Non-Residential29

31. Draft DC Rates For Discussion:
Are there any comments surrounding the draft DC rates? (they may change as public engagement continues and staff work to refine the capital program) 30

32. Next Steps
Finalize capital program required for growth with staff (early July, 2017)
Meetings with Stakeholders (July 26th & August, 2017)
Public Engagement (mid August, 2017)
Draft Background Study and draft by-law prepared (August 28, 2017)
Meeting with Senior Management Team (early September)
Council Workshop (mid September, 2017)
Public Engagement (mid September, 2017)
Final Background Study and draft by-law released to public (end of September, 2017)
Public Meeting (mid October, 2017)
Council Consider By-law for adoption (late November, 2017) 31

33. Questions ? 32

34. APPENDIX / Backup Material33

35. Relationship Between Needs to Service Growth vs. Funding
Service New Growth/Users
Development Charges
Taxes, Water & Wastewater Rates, Grants/Subsidies, etc. 34

36. Local Service Policy
Subdivision Agreement Conditions - the Act broadens the coverage of such agreements to include “local services related to a plan of subdivision or within the area to which the plan relates”, rather than simply local services within a plan of subdivision, as under the old Act.
This suggests the need for a D.C. Background study to provide a local service policy
Further, due to Bill 73, “no additional levies” clause (discussed later), a Local Service Policy is required to be developed and approved by Council, through the D.C. study process, to clearly define what developers would be required to do as part of their development agreements versus what would be included in the D.C.
Items to consider are collector & arterial roads, intersection improvements & traffic signals, streetlights & sidewalks, Bike Routes/Bike Lanes/Bike Paths/Multi-Use Trails/Naturalized Walkways, Noise Abatement Measures, Land dedications/easements, water, wastewater, stormwater, and park requirements. 35

37. Growth Forecast 36

38. Level of Service Ceiling37

39. Survey of DC’s - Residential
Note: Draft Calculated Charges are subject to change as staff finalizes capital program 38

40. Survey of DC’s – Non-Residential Commercial
Note: Draft Calculated Charges are subject to change as staff finalizes capital program 39

41. Survey of DC’s – Non-Residential Industrial
Note: Draft Calculated Charges are subject to change as staff finalizes capital program 40