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Term Paper: The City of Regina’s Development Levies

Ashley Paton

500489817

PLG710

Professor Craig Binning

November 10th, 2015

Disclaimer: The views and opinions expressed in this paper are those of the author and do not necessarily reflect the official policy or position of the City of Regina. The

information and analyses in this report are based only on what data was available and accessible at the time.

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November 11th, 2015 To: Members of Executive Committee Re: Policy and Strategic recommendations for Development Levy and Servicing

Financing Agreement Fees for Infill Development _______________________________________________________________________ RECOMMENDATIONS

1. That the Executive Committee approve the removal of the existing infill

Development Levy exemption zone, as per report EX15-22

2. That there be an exemption of Servicing Agreement Fees and Development

Levies for the development of secondary, laneway and garden suites on infill

properties

3. That there be an exemption of Servicing Agreement Fees and Development

Levies for the redevelopment of brownfield sites on infill properties

4. That the impact of laneway and garden suites on existing infrastructure and

transportation capacities, as well as the potential impacts of a Development Levy

exemption, be looked at in coordination with the review of the Laneway and

Garden Suites Guideline following the Laneway and Garden Suites Pilot Project

5. That the City create quantifiable housing targets for purpose-built rental,

affordable ownership, entry-level ownership, secondary suites, and affordable

rental and transitional housing as part of an update to the Regina Comprehensive

Housing Strategy (2013).

PURPOSE

The purpose of this report is to discuss the options available to the City of Regina as they

move towards the removal of their infill development levy exemption zone and to explore

possible exemptions to Development Levies (DL) in order to achieve the strategic goals

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and objectives outlined in the Official Community Plan (OCP) Design Regina, 2013

while still ensuring the long-term financial viability of the City. This report follows the

orders of the Executive Committee made on November 4th, where they directed the

Administration to provide a supplemental report that would contain information on

different models including area-specific rates and associated financial implications (City

of Regina, 2015).

BACKGROUND

The City of Regina is the second-largest city in the province of Saskatchewan and as

outlined in Design Regina (2013), the City’s Official Community Plan (OCP), the city is

planning and managing growth for a population of 300,000 over the next 25 years (City

of Regina, 2013, p. 3). Servicing Agreement Fees (SAF) and DLs are charges levied by

the City to pay for the capital costs brought on by population growth. SAFs are levied at

the subdivision stage via a Servicing Agreement between the City and the developer

while DLs are levied when a development permit is issued on lands that do not require

subdivision but would otherwise be subject to SAFs.

DECISION HISTORY

On October 14th, 2015, the City Planning and Development Department put forward a

series of recommendations to the Executive Committee including an update to the

“Administration and Calculation of Servicing Agreement Fees and Development Levy

Policy” which would see the introduction of a three-year phase-in for a new Greenfield

SAF and DL rate which would be set at $379,000, effective January 1, 2016 (EX15-22,

p.6, 2015). The staff report EX15-22 also recommended changes to the method of

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calculating the share of capital costs allocated to greenfield and infill development, which

would place less stress on the mill rate to pay for growth-related infrastructure projects.

The monies collected from SAFs and DLs for projects that would accommodate one type

of growth over another, either Greenfield or infill, would be allocated 100% to the

appropriate projects, while the monies collected from SAFs and DLs for projects that

accommodate both greenfield and infill growth would be allocated to both types of

projects based on their share of growth, as seen below.

Source: City of Regina, 2015

Since 1989 there has been a large exemption zone for the charging of DLs as seen below.

This area shown in green is the area that the recommendations below will be applied to,

whenever the term “infill” in used.

Source: City of Regina, 2015

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Based on the public consultation done as part of the EX15-22 report, it was noted by both

the public and City staff that there is a need for a differential rate for infill development

and that the exemption zone shown above should be removed. The recommended updates

proposed in the “Administration and Calculation of Servicing Agreement Fees and

Development Levy Policy” have their benefits in proposing a fair and equitable way to

splitting costs between taxpayers and developers.

Lands already exempt from DLs, as per section 4.7 in the proposed “Administration and

Calculation of Servicing Agreement Fee and Development Levy Policy (Appendix A)”

(2015) are: “Internal environmental reserves; freeways; expressways; interchange lands;

major utility corridors (electrical transmission corridors and pipeline corridors unfeasible

for development as a result of safety and/or environmental regulations) lakes; lands used

to accommodate permanent City-owned pump stations or lift stations.

The City is currently developing a financial policies framework and long-range financial

plan, which will help to mitigate risks to taxpayers, with regards to the SAF and DL rates.

RELATIONSHIP TO DESIGN REGINA (OFFICIAL COMMUNITY PLAN)

One of the main policies outlined in Design Regina: The Official Community Plan Bylaw

2013-48 is policy 1.16, which states “growth pays for growth”. Policy 1.16.3 states that

this will be ensured by “reviewing the areas to which Service Agreement Fees apply,

including the possibility of fees varying with location, density and use as necessary”

(p.15). In order to achieve the goals and policies outlined in the OCP, encouraging infill

development is necessary. A few of these policies include 2.3: directing 30% or more of

new population to existing urban areas, 2.5: developing compact and contiguous

neighbourhoods, and 2.9: directing 10,000 or more new residents to the City Centre.

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Intensification will play a major role in whether the city achieves these goals or not and it

requires the redevelopment of underutilized, vacant, and contaminated parcels of land.

With that being said, the City’s linear infrastructure is aging and, with intensification, it is

in danger of exceeding capacity. In order to properly fund the needed upgrades to linear

infrastructure, which includes “sewage, water, drainage works, roadways, parks and

recreational facilities”, the City needs to ensure adequate revenue sources (Planning and

Development Act, 2007, s.169). This is not to say the City cannot continue to use and

explore innovative public-private partnerships like the one being used to upgrade the

Wastewater Treatment Plant, but the collection of DLs on major infill projects within the

city will significantly affect the City’s ability to fund the upgrades needed because of

intensification (City of Regina, 2015).

OPTIONS

As per s.169(7) in the Planning and Development Act, 2007, municipalities can exempt

land uses, classes of development, or zoning districts from development levies if

specified in their development levy bylaw. As mentioned previously, the City of Regina

currently has an exemption zone for the already developed areas of the city. In order to

achieve the growth and intensification targets set out in the OCP, various incentives

could be used via the development levy bylaw to encourage specific types of

development.

Development Levy Rate Exemption for Secondary Suites, Accessory Suites, and

Laneway Housing

One of these incentives could be to decrease the amount payable for the addition of a

secondary, garden or laneway suite on infill lots. In the City of London’s Development

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Charges Bylaw, it exempts developments that create one or two “additional dwelling

units in an existing single detached dwelling or one additional dwelling unit in any other

existing residential building, provided that the total gross floor area of the additional

unit(s) does not exceed that of the existing dwelling” (Part V, s.36(b)). The City of

London and the City of Regina both have similar intensification targets and are both

facing the problems associated with aging infrastructure (City of London, 2015).

One of the main objectives of the Saskatchewan Provincial Housing Strategy is to

increase the supply of rental housing. From a supply perspective, homeowners who are

thinking of building a secondary suite are going to be deterred from doing it through the

proper legal channels if they are required to pay the development levy rate. Goal 3 in the

City of Regina’s Comprehensive Housing Strategy (2013) also calls for the creation of

secondary suites in order to encourage more compact development and to increase the

supply of affordable housing. If an exemption on DLs is given, homeowners might me

more inclined to build secondary, garden or laneway suites, and do so through the

correct legal and regulatory channels, which would mean an increase in the overall

supply of housing units.

The impact of laneway and garden suites on existing infrastructure and transportation

capacities, as well as the potential impacts of a DL exemption, should be looked at when

reviewing the “Laneway and Garden Suites Guidelines” after the Laneway and Garden

Suites Pilot Project, which is set to begin in November of 2015 (City of Regina, 2015).

Financial Implications

The City of Regina does not currently have any specific targets for secondary suites but

the City of Saskatoon does in their 2013-2022 Housing Business Plan. Their target for

secondary suites is thirty per year. Saskatoon and Regina have similar Federal and

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Provincial funding sources available to them for the provision of affordable houses and

secondary suites as well as similar populations, which is why Saskatoon’s target was

used for the calculations below. The following calculations use the proposed 2016

phase-in rate of $379,000/10,000m2 1 and considering that the average lot size in 2015,

based on the City’s property assessment data is 640.3m2, the estimated development

levy, per residential unit, is $24,267.37 2 (City of Regina, 2015).

Projected Annual # of Secondary

Suite Applications

2016

2016 Development

Levy Rate without

exemption (per unit)

2016 Development

Levy Rate with exemption (per

unit)

Potential lost Development Levy revenue for City

because of exemption

30 $24,267.37 $0 $728,021

This option, if accepted would not be providing the city with any new revenues and

would not be taking any revenues from existing sources as the exemption zone is the

prevailing policy.

Development Levy Rate Exemption for Brownfield Sites

There are many economic, social, and environmental benefits to redeveloping brownfield

sites and redevelopment supports two OCP policies including 2.10.5, which states that

intensification should occur on diverse parcels of land including brownfields. Policy 8.5

also states that brownfield redevelopment for the purposes of increasing the supply of

housing should be encouraged.

The City of Saskatoon has an extensive brownfield strategy and one of the practices they

employ in order to encourage the redevelopment of brownfields is the development of a

set of criteria for older and potentially contaminated properties that allows the City to

1AsperthephoneconversationonNovember5th210,000/640.3=15.62…units/ha.379,000/15.62…=$24,267.37

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waive off-site levies, or DLs. If a DL exemption is not given for brownfield sites, these

lots have the potential of staying vacant for several more years with the possibility of

becoming more contaminated, leaving unlocked potential in some of the city’s most

central locations and possibly creating a health hazard for nearby residents. The impact

of a DL exemption on brownfield sites could lead to the revitalization of derelict

neighbourhoods and could have positive benefits on the tax base.

Financial Implications

As per the EX15-22 Staff report, the $379,000/ha rate is for residential, commercial, and

industrial. This rate is applied below to a non-exhaustive list of vacant lots that were

previously service stations.

Address Lot Size (ft2)*

Lot Size (ha)

Development Levy Charge

1005 Pasqua Street NA NA NA 1035 Pasqua Street 20,048 0.1863 $70,589

3134 Dewdney Avenue 13,511 0.1255 $47,572 2809 Dewdney Avenue 10,139 0.0942 $35,699 2700 Dewdney Avenue 13,523 0.1256 $47,614 367 Albert Street North NA NA NA

2165 Albert Street 18,732 0.1740 $65,955 15th Avenue and Albert Street NA NA NA

856 Dewdney Avenue 21,122 0.1962 $74,370 328 Victoria Avenue 22,893 0.2127 $80,606

101 Victoria Avenue East 12,125 0.1126 $42,692 106 Victoria Avenue East 45,465 0.4224 $160,082

802 Dewdney Avenue East 23,341 0.2168 $82,184 1775 Dewdney Avenue East 18,925 0.1758 $66,635 1920 Victoria Avenue East 43,729 0.4063 $153,970 2020 Victoria Avenue East NA NA NA

Total 263,553 2.4485 $927,969 *Source: City of Regina’s Assessment & Taxation Records

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This $927,969 of revenue that could be collected from the development of these vacant

and contaminated lots would be surplus to the city as the current policy allows for these

properties to be exempt from paying anything.

Development Levy Rate Exemption for Affordable Housing Units

Goal 1 in the City of Regina’s Comprehensive Housing Strategy (2013) is to increase

the supply of affordable housing, including affordable ownership and rental units.

Affordable housing is defined as a household spending 30% or less of their pre-tax

income on shelter costs (Canadian Mortgage and Housing Corporation, 2014).

Affordable housing is subsidized from the Federal and Provincial levels of government

and the number of units built is dependent on funding from these levels of government.

If a DL exemption is not given to affordable housing developments, developers might be

encouraged to build in Saskatoon rather than Regina because of their existing incentives,

which has several impacts on the City’s potential tax base and the City’s ability to

achieve their affordable housing goals.

Financial Implications

The City of Regina does not currently have a defined set of targets for affordable

housing but the City of Saskatoon does. Regina and Saskatoon have similar Provincial

funding sources and incentives in order to encourage developers to build affordable

housing. Therefore for the purposes of calculating the financial impacts of a possible DL

exemption, Saskatoon’s target of 70 “affordable rental and transitional housing” and 100

“affordable ownership” will be used (City of Saskatoon, 2013, p.9). The City of

Saskatoon differentiates between purpose-built rental, affordable ownership, entry-level

ownership, secondary suites, and affordable rental and transitional housing. For each of

these different types, the City has set annual targets to meet. The City of Regina, in their

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public consultation should explore the possibility of different exemptions or discounts

based on these different types.

# of Units (per year)

2016 Development

Levy Rate without

exemption (per unit)

2016 Development

Levy Rate with exemption (per

unit)

Potential lost Development Levy revenue for City

because of exemption

170 $24,267.37 $0 $4,125,453

The Saskatchewan Provincial Housing Strategy outlined a few different funding

programs and incentives for both municipalities and homeowners including the

Province’s Rental Development Program that funds up to 70% of the capital costs for

new affordable rental units, the Province’s Rental Construction Incentive (RCI) that

matches grants of up to $5,000 per affordable ownership home constructed, and Head

Start on a Home that provides incentives for developers to construct entry-level homes

(City of Saskatoon, 2013, p.4). The City could explore a way of diverting a portion of

these funds to the infrastructure projects needed to accommodate the increased densities.

CONCLUSION

The City of Regina continues to experience a steady increase of population and in order

to achieve the intensification and infill targets outlined the OCP the City needs to look for

ways to incentivize secondary suites, affordable rental and ownership housing, and

redevelopment on brownfield sites. At the same time the City faces extensive and

expensive linear infrastructure upgrades needed as a result of increased densities and

diminished capacities of the existing infrastructure. Exploring the possibility of DL

exemption zones or discounts, specifically for affordable housing units and brownfield

sites, following the removal of the existing exemption zone that covers the entire existing

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city would help the City to achieve the policies of the OCP and of the Province’s several

strategic goals. Creating targets and reporting on the progress of achieving these targets

for this would aide the city in being more transparent and accessible to the public.

Respectfully submitted,

Ashley Paton, Planner II, City Planning Department

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APPENDIX

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Appendix A