Monday 21 April 1997
Development Charges Act, 1996, Bill 98, Mr Leach /
Loi de 1996 sur les redevances d'aménagement, projet de loi 98, M. Leach
Association of Municipal Clerks and Treasurers of Ontario
Ms Cathie Best
Mr Jim Sangster
Mr Jim McQueen
Ontario Professional Planners Institute
Mr Bernie Hermsen
Mr John Livey
Association of Municipalities of Ontario
Mr Terry Mundell
Ontario Hospital Association
Mr Dennis Egan
City of Thunder Bay
Mr John Stadtlander
Canadian Institute of Public Real Estate Companies
Mr Lorne Braithwaite
Mr Mark Noskiewicz
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Présidente: Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Présidente: 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 JohnGerretsen (Kingston and The Islands / Kingston et Les Îles L)
Mr ErnieHardeman (Oxford PC)
Mr GillesPouliot (Lake Nipigon ND)
Mr MarioSergio (Yorkview L)
Clerk / Greffière: Ms Donna Bryce
Staff / Personnel: Mr Ray McLellan, research officer, Legislative Research Service
The committee met at 1549 in committee room 1.
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.
ASSOCIATION OF MUNICIPAL CLERKS AND TREASURERS OF ONTARIO
The Chair (Mrs Brenda Elliott): Good afternoon, ladies and gentlemen. I call to order the hearings for Bill 98, An Act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth. We apologize for our lateness, but duties in the House take precedence, I'm afraid.
Our first presenters this afternoon are Jim McQueen, Cathie Best and Jim Sangster. Would you please come forward. Welcome. Would you like to introduce yourselves and your association for Hansard. You have 20 minutes for presentation time. That includes your presentation and questions from the three caucuses.
Ms Cathie Best: My name is Cathie Best and I'm the vice-president of the Association of Municipal Clerks and Treasurers of Ontario. Currently, I'm the director of the clerks division for the city of Etobicoke. With me are Jim Sangster, treasurer of the town of Haldimand, and Jim McQueen, past president of the association and director of corporate services for the town of Milton. We're all current AMCTO members.
AMCTO is the largest voluntary professional association for municipal government managers in Canada. The association has been in existence since 1937. Our letters patent were first issued by the Ontario government in 1962. Our current membership is over 2,500 municipal officers, of whom about 2,200 have obtained formal certification from AMCTO. Our members are represented in approximately 93% of the municipalities in Ontario.
Clerks and treasurers provide the professional expert administrative support required for the efficient, continuous and professional delivery of municipal services. Clerks and treasurers are akin to the non-partisan heads of departments in provincial and federal government administration, where a neutral expert public service is central to effective administration. We appreciate very much the opportunity to appear before you today and put our views on Bill 98 before you and on the public record.
There are numerous issues that AMCTO could raise in regard to Bill 98. However, we will not inundate you with all our detailed concerns. Rather, we've provided you with a separate written submission that identifies AMCTO's issues and details our recommendations. We would like to take this opportunity to raise our priority issues and recommendations in order to make this presentation more digestible and to fit into the time we've been allotted.
Before commencing with our concerns and recommendations, we would like to emphasize that in general AMCTO believes that municipalities have used the authority granted to them in the current act in a responsible manner. AMCTO believes that the charges imposed by municipalities have not had a significant impact on the quantity of housing construction or the cost of housing to the home buyer. In fact, many municipalities have chosen to impose only a percentage of the development charge that they have had the authority to levy. The current act provides this flexibility, while not inhibiting the ability of the municipality to address unique situations.
Bill 98, however, reduces municipal flexibility to finance growth-related service requirements and in a number of situations will impose additional costs on the citizens of municipalities, to the benefit of the development industry. Furthermore, there is no mechanism to require developers to pass on the savings from development charges to home buyers and the development industry has given no guarantee of an intention to do so. As a consequence, there is little likelihood that Bill 98 will result in lower prices for new housing. The market, not development charges, determines the price of housing.
Having said that, AMCTO believes that the single most significant aspect of the bill for municipalities is the compounding impact of several of the proposed changes. The changes in the method used to establish service levels, the application of uncommitted capacity, the required payments for credit that apply to ineligible services, the statutory minimum contribution provisions and the elimination of some services from the development charge calculation are factors that each on its own would have a significant impact on municipal financing of growth-related services. When compounded, these changes will place significant pressure on the property tax, to the benefit of the developer or builder.
The first of our issues relating to specific sections of the proposed bill involves the requirement that municipalities reimburse the credit holder for outstanding credits related to ineligible services. These payments would be required within 170 days after the bylaw under which the credits were given either expires or is repealed. The moneys to pay these refunds must come from a source other than the development charge reserve fund.
This creates a situation in which municipalities, having entered into agreements to provide facilities in exchange for development charge credits, are now forced to assume debt, utilize reserves or increase taxes to cover these mandated refunds to the credit holder. These payments are due within six months of Bill 98 coming into force. The issue is exacerbated by the fact that debentures are not a source of revenue that can be utilized for this purpose. This will probably place some municipalities in a position of financial hardship. AMCTO believes that these agreements were entered into by municipalities and developers in good faith and that they should be honoured.
Therefore, AMCTO recommends that the bill be amended to remove any retroactivity by indicating that its effective date is the date of its proclamation or, alternatively, the date on which it was tabled for first reading in the Legislature; or that the current act continue to apply to all municipal development charge bylaws and agreements that were in force prior to the introduction of Bill 98 for the term of the bylaw or until the enactment of a new bylaw under the Development Charges Act, 1996, whichever occurs first.
The second issue we want to raise relates to eligible services. Just the fact that Bill 98 lists a group of services or facilities that are ineligible would suggest that all other services are eligible to be included in a development charge. Bill 98 also provides the minister with the ability to prescribe other ineligible services.
AMCTO is deeply concerned that the minister could at any time, by regulation, deem certain critical services and facilities ineligible. This could potentially jeopardize a development proceeding or affect agreements and financing arrangements that were entered into in accordance with the current legislation and regulations and with the agreement of all parties to the arrangements.
From my personal perspective, this ability to add ineligible services by regulation could also pose financial difficulties either to the municipality or to the developer. I believe that any ineligible services should be specified up front in the act and that any changes should require an amendment allowing for public input and be subject to proper transition procedures.
AMCTO believes that there are certain core services that are absolutely necessary for development to proceed. These include roads, sewage and waste water treatment, water and hydro. Given the need for these services to be available before development commences, and considering the copayment provisions included in Bill 98 in conjunction with reduced provincial grants and increased responsibilities and costs, AMCTO believes that these development-related essential services must be treated in a unique manner within the legislation.
As such, AMCTO recommends that the Development Charges Act, 1996, be amended to include a list of eligible services. Such a list should include, but not be limited to: sewage and waste water treatment systems and facilities, water treatment and distribution systems and facilities, roads, transit services and facilities, fire and police services and facilities, hydro production and distribution facilities, solid waste management facilities, recreation facilities, libraries and parks.
AMCTO also recommends that specific services be exempt from the copayment provisions of Bill 98, including but not limited to sewage and waste water treatment systems and facilities, water treatment and distribution systems and facilities, roads, hydro production and distribution facilities.
Furthermore, the association recommends that Bill 98 be amended to provide that any agreements entered into in accordance with the act will be immunized or grandfathered from impacts arising out of future legislative or regulatory change.
The third issue that we'll raise involves service levels. Specifically, Bill 98 provides that service levels for the purpose of determining the amount of a development charge must be no higher than the 10-year average for each service included in the development charge. This approach fails to take into account factors that affect service level standards, including changes in provincially mandated standards, changes in business approach, services that are new to the municipality, such as sewer and water, and recent growth situations or projected growth situations.
Each of these factors, alone or in combination, could impact on required service levels and costs and jeopardize development and municipal financial stability. In reality, the service level issue should be a non-starter since many municipalities set development charges at a percentage of the allowable charge. Municipalities generally have not selected peak service levels as provided for in the current act. Most municipalities use existing standards as the basis for their charges. At the same time, the current act does allow municipalities to address specific needs or regulatory changes when establishing service levels.
Therefore, we recommend that service levels be set at a level no greater than either a 10-year average or current levels, at the discretion of the municipality. The exception to this would be situations where a provincial act or regulation requires a higher level.
The fourth and final concern AMCTO will bring to your attention today relates to the calculation of capital costs. It is our understanding that Bill 98 would discourage municipalities and their citizens from raising funds to cover municipal contributions towards projects to which development charges apply. Community fund-raising and similar types of contributions would likely be considered as revenues under subsection 5(2) of Bill 98. As such, these funds would go to reduce the developer's charge rather than being applied directly to the municipal cost.
Therefore, AMCTO recommends that community fund-raising efforts and similar types of contributions be used exclusively as contributions to the municipal component of a facility or service to which a development charge is being applied.
AMCTO is of the opinion that the development charge process has served well the citizens of Ontario, the development industry and municipalities since its inception in 1989. The amendments proposed by AMCTO serve to maintain many of the positive aspects of the Development Charges Act, while recognizing the provincial government's interest in promoting economic growth and job creation through the development industry.
What we have addressed today, in the interests of time and concision, are only our major concerns and recommendations regarding the proposed legislation. We have prepared a fairly lengthy list detailing issues already raised with ministry officials and supplied to you today.
It should be emphasized that AMCTO fully recognizes the need for municipal reform. Municipalities are not exempt from the paradigm shift that all governments and the private and public sector are confronting. AMCTO would like to be actively involved in the reform process. Therefore, we look forward to appearing before this committee again as the process continues to unfold. If you wish to hear our views on any aspect of the reform process, we hope you'll contact us. We thank you again for your attention.
Mr John Gerretsen (Kingston and The Islands): One of the things we've heard particularly from the builders and the development industry is the fact that a number of municipalities have abused the powers the current act gives them. They keep citing the notion that museums and expensive city halls have been constructed as a result of the act that's currently in operation.
Do you have any comments on that? Do you agree with that, or is it your assessment -- you represent a fair number of municipalities, not all of them, across the province -- that this has not been the case, in other words, the money has not been used for so-called soft services?
Mr Jim Sangster: Granted, in some municipalities it has been used for those types of facilities, but I think for the most part across the province it has been used for the other items that are currently included in the act that are not so much what you'd look at as enhanced services or special services to benefit a municipality directly, as opposed to benefitting the residents of the municipality.
I believe most municipalities have been very conscientious in the application of their development charge funds. In the studies that went into those initial development charge bylaws, I would say, as a Treasurer in a municipality that is relatively small, most of the municipalities have actually implemented a development charge that was much below the level that could have been substantiated through our initial studies, which were subject to appeal and which eventually were implemented.
Mr Gerretsen: That's my understanding as well. Do you have any idea, then, as to why the government feels it's necessary to bring in this kind of legislation at this time, when most municipalities aren't even using it to the fullest extent that they're currently allowed to?
Ms Best: Our intent here this afternoon would basically be to deal with the legislation before us, and not the reasons for which it was brought forward. We can reiterate that the studies and the surveys that have been undertaken have shown that municipalities are not using the peak levels and have not been, in most of the instances throughout Ontario.
Mr Gerretsen: Very well said, from a staff viewpoint. Anyone else?
The Chair: Very briefly.
Mr Mario Sergio (Yorkview): I have one brief question. When we opened up the hearings recently in Oakville, in answer to a question, the minister said that this will be saving new home buyers some $5,000 a house, based on a $160,000 price. Do you have any comment? Do you really believe that is going to happen? How are you going to pass this on to a new home buyer?
Ms Best: In my speech I advised that it was the market that determined the cost of housing; it's not the development charges legislation. It's through the frugalness of municipalities. Municipalities realize that development is a bonus to them, and they are looking for development. It's to their detriment to take peak levels or to abuse the actual legislation, and they haven't traditionally. So it would be the market that would be setting the price of the housing and not the legislation.
Mr Sergio: Hazel McCallion says unless --
The Chair: Sorry, you must excuse me. Mr Pouliot.
Mr Gilles Pouliot (Lake Nipigon): As the process continues to unfold, and you've mentioned that so rightly, it goes to the very heart. Last week some of us were travelling the province to listen to presenters under the auspices of Bill 106, the assessment and reassessment. Some of our colleagues will parallel being subjected to the fascinating world of sewer and water via the water and sewer act. Today it's Bill 98, and now I begin to understand what you say when you say, "As the process begins to unfold."
If I were you, madam, with the highest of respect, and maybe you've already done this, I would look at the governance vis-à-vis receivership, because I'm wondering -- you must -- where is this all going to stop? It's happening so quickly. Maybe some people have overestimated the ability of society to assimilate changes, digest them, while people wish to have some changes.
I have one question. I'm a homeowner in your municipality, and I see that you have a new subdivision. I know, because I've read, that the developers no longer have the same responsibility to pay for those services. Under general purposes, am I right in assuming that as a present homeowner -- not as a newcomer in the subdivision, but as one established there -- I will pay for a portion of the new subdivision? If not, tell me how I will avoid it. In other words, do you have a choice?
Mr Jim McQueen: Under the draft legislation, there is strong feeling that the existing taxpayer in all communities will help pay for development in the future because cosharing legislation is being recommended. There really isn't any way of avoiding those additional costs that will come through the tax levy, other than possibly looking at reducing service levels, which the communities to date have really wanted. That's one solution, I suppose, to really drop service levels in municipalities.
Mr Pouliot: But when I buy a house in your community I've scanned, I've looked, I've asked, I've listened. Am I not buying a little piece of the museum? Am I not buying the trees, the environment, the location, the location, the location at the same time? Don't you see yourself or catch yourself, and the developer too, in a catch-22 situation, where if you don't provide those amenities -- and I'm not talking here about gold-plated; I'm talking about the basic things one wishes to have. I want to be like the others. I move to your place, and if there's no library, no new museum because you don't have the money to provide them, the price of houses is not as attractive, the community is not as attractive, I might go elsewhere.
A cynic mentioned to me -- and I don't want your comment; this would be imputing motive --
The Chair: We need a question.
Mr Pouliot: -- that it's "pay back friends" time. They don't know how to go about it, and no one believes the developer will pass the savings along to Gilles Lunchpail. Am I right or wrong?
Mr McQueen: We believe that we will not see the so-called savings passed along to homeowners, based on the draft legislation that's in place today.
Mr Jerry J. Ouellette (Oshawa): We as politicians, from all parties, are in a unique and fortunate or unfortunate situation, depending on which way you look at it, in that we hear from all sides. We hear from the developers, where they say that the sky is falling, the municipalities tell us that the sky is falling etc.
When we sat down with them, I asked them all the same question. I said, "Why haven't you sat down together to come to some positive conclusion on what you agree or disagree with?" Why hasn't your organization, at least the last I checked with the developers in my area, sat down with them to talk about this legislation and to come forward as a group on what you agree or disagree with?
Ms Best: The responsibility of actually sitting down with the developers is the municipalities' and I think the municipalities have had a good history of sitting down with the developers through the process of setting up their bylaws under the current legislation.
Mr Ouellette: It hasn't happened at all in our area.
Ms Best: With our association, we're responsible to the membership, which is the member municipalities. Those are the ones we're representing.
Mr Ouellette: So don't you think part of that responsibility, rather than just internally, is to go externally and get input as well? Wouldn't it be advisable to sit down with some of the developers to find out why they would take that stance?
Ms Best: Why the developers take the stance that they're not contributing to this?
Mr Ouellette: Sure.
Ms Best: We haven't had the opportunity to do that and again, we would be more responsible to our municipalities than to the developers' views. They have their developers' association as well that would come forward.
The Chair: Our time has expired. Thank you very much for coming before us this afternoon to bring us your advice. We appreciate it.
ONTARIO PROFESSIONAL PLANNERS INSTITUTE
The Chair: I'd now like to call the representatives from the Ontario Professional Planners Institute. Welcome. If you would please introduce yourselves for Hansard.
Mr Bernie Hermsen: My name is Bernie Hermsen. I'm a planning consultant. I'm also on the council of the Ontario Professional Planners Institute. With me today is John Livey, who is a past president of our institute, as well as the commissioner for York region.
The Ontario Professional Planners Institute represents over 2,200 practising planners in the province and our members work for government, for private industry, for universities and for special agencies and do a wide range of planning from rural to urban to community development planning.
The brief we have submitted to you today was prepared by our public policy committee and approved by our council. First of all, by way of general comment, I would just like to say that the province of Ontario encourages well-planned growth and development and we believe that development charges are an important means of funding the infrastructure needed to accommodate this growth and development.
John will now make a few comments and then I'll close with a final comment.
Mr John Livey: I'm going to address my remarks to the scope of services and to the determination of the development charges sections of the bill.
First, on scope, it's helpful to have a provincially mandated list of eligible and ineligible services. It adds certainty and predictability to the process. People can understand what is chargeable or not. What's on the list should be the essential elements of a growing community's capital investment. It's not its operating costs, but its capital investment, attributable to growth, so that the new residents and businesses are a part of the development of a new community.
Establishing a list focuses debate on, what are the essential capital projects for a new community? What makes a new community attractive to new investment and to its citizens? Planners across Ontario are saying that a diminution of the attractiveness for economic development of communities by eliminating certain essential elements like hospitals, the extra parkland and some of the tourism items are going to diminish its economic potential.
I'll give you an example in York region. Right now Georgina, which charges a fairly low rate of development charges relative to other rates in York region, has a shoreline that's largely developed by old cottages built back in the 1930s, 1940s and 1950s, and it's largely inaccessible to the population. Right now a portion of their charge is trying to buy parkland, in addition to the 5% in the Planning Act, for public access. That should make that community more attractive to investment and should make the community more attractive to new residents.
While the province has been very helpful and the bill is very helpful in defining the scope, there are some items that have been left off the list that are going to diminish the attractiveness of communities for investment and locations.
In determining the development charges, there are no provincial standards established for the level of service, unlike the other list, where it's very clear what's on and what's off. The only limitation is that there be capping to the average level of service in the preceding 10-year period.
What is established is a process for calculating the charge, plus a developer's or new homeowner's discount for selected services. Section 5 of the act requires municipalities to first estimate the amount, type and location of development, estimate the need for services created by that development -- not to exceed that 10-year average -- subtract uncommitted excess capacity, subtract the benefit to the existing community and then calculate the amount of capital projects that will be required to meet the need attributable to growth. So far so good. It's complicated, it's time-consuming and it relies on extensive background documents, but it's fair and it's appealable.
Then the act goes on to provide the discount which kicks in by reducing the charge, in some cases by 30% or 10% or, as I understand, possibly zero for hard services. Had this discount been an alternative to the calculation of the capital costs for a typical development as an alternative to that calculation, that would have been one thing. But in essence, it's a way of establishing the benefit beyond the calculation that's documented in the calculation in the background studies. So you have a very thorough calculation and then you have a further discount.
In our view, this is going to cause some problems. I want to talk about transit for a minute. Some discount rate is going to be applied, presumably, to transit, although it probably should be a hard cost with a zero discount. Here the calculation on the level of service under the bill causes all kinds of odd problems.
First, once the future demand for transportation in a community to and from different places is calculated, minus the excess capacity that's available, the question is, what will the modal split, the amount of transit usage versus road usage, be in a municipality? Will it be the 7% transit split that I now enjoy in York region? Or will it be the 24% to 30% transit split that we hope we will achieve in York region in 2021 when the population has doubled to a million people?
Either way, new facilities will be required: new roads, new bridges, new buses, new busways. The most economical way is the higher transit scenario. It's the cheaper, long-term, developable-charge scenario and it's cheaper because we don't have to build an excessive amount of extra road widenings and extra roads in York region. Instead, we can use the existing transit infrastructure, the roads, plus we have to buy some buses.
But the methodology is forcing us to use the 10-year average, the preceding average, to calculate the charge, and in effect we're calculating the charge on the basis of history rather than informed foresight. Add the developer's discount into this and you can ensure that we'll be developing in York region on the basis of a roads-only scenario and that will be more expensive, with higher charges to homeowners in our new communities.
The use of the 10-year average level service is at the root of this problem. UDI will have presented to this committee examples of excessively high service levels in some municipalities to argue for the discount. Unfortunately, this only gets them at the excessive standards in a backwards way, rather than establishing caps on service levels eligible for development charge funding.
What's the right level of service? What's the public debate about right levels of service for different things in our communities? Yes, there would have to be a geographic variation in the standards to recognize urban, rural and urbanizing situations. But this at least would be a direct and understandable public debate on the issue.
Right now, a municipality with the highest service level can continue it with the discount for some services, while a frugal municipality is limited to its historic level of capital spending minus the discount. I'll turn it back over to Bernie.
Mr Hermsen: Our final comment deals with level of service. There is a provision in the bill which would limit the level of service to what has been provided over the last 10 years in a municipality. Our concern is this provision may particularly impact on smaller rural municipalities which have traditionally not had urban-type services.
However, they may be faced with growth pressures where they are approaching a threshold demanding new service requirements. For instance, where they may not have had sewage treatment or where they may not have had municipal water systems and distribution systems in the past because they hadn't reached a threshold of growth to require those services, they may now be faced with having to provide same.
The provincial policy statement approved in May 1996 encourages full sewage and water services not only for urban areas but in rural settlements, and perhaps there's an opportunity here to adjust the bill to recognize this unique circumstance, to allow our rural neighbours to also benefit from the Development Charges Act.
Mr Pouliot: As I scanned your brief, your presentation, I began to try to differentiate -- I sense some anxiety and I need your help; you will correct me -- the hard from the soft services. You mentioned transportation and I have a question vis-à-vis transportation.
For instance, while being asked to provide that "essential service" in a new subdivision, if the province, on hard stock, on capital, was to lessen its contribution in lieu of the traditional 75-25 share, 75 being the provincial responsibility, you would now be asked to share further in that "adventure" by forking over 50-50, 50 cents on the dollar. Then, on the fare box, since no municipal transit system breaks even, the province would tighten the vise to squeeze a little more. Then you'd say, "My God, where will it stop?" But while it doesn't stop there, in terms of your supplementary allocation, the province would again cut another 10%, or eliminate it.
You see, this Bill 98 does not work or is not applicable in isolation. It is webbed, it is meshed with other bills that are advancing on many fronts, and they really have to be factored in. Then we have to see the implementation, the results of all this, in order to be able to cost it. So I must caution, with respect, that when you look at Bill 98, you must work it in conjunction. It's a connected bill. It's directly related with other pieces of legislation that are coming through.
I sense that you're asking a lot of questions, yet you fail to come up with answers at this stage. Implementation is quite near. At the end of the day, the majority shall have its way. That's what we fear too, as we try to mesh and blend the legislation. We'd welcome your comments.
Mr Livey: I don't think we're here to talk about anything but Bill 98. I do recognize the point that these things are related. Our point on transportation is that transit is transportation, and it should be treated like roads, whichever way the downsizing, the disentanglement, goes. It's difficult with all these things up in the air, obviously, but we're trying to do our best on this bill.
The Chair: Dr Galt, do you have a question?
Mr Doug Galt (Northumberland): No, I don't.
The Chair: Mr Ouellette, then, please, then Mr Hardeman.
Mr Ouellette: I'll be brief. I see the PA would like a question.
Recently I sat in on a meeting -- just today, actually -- where one of the local municipalities wants to make it more attractive in their community, to use your phrase, and the municipality wants to pay the $1.5-million fees in order to attract a junior A team to the municipality, along with building a new arena for the team. Where does it end, when you attract, and where does it begin? Where do they draw the line? Do you think that would be fair?
Mr Livey: If I could, I think this is a really good question in the sense of what is the right level of service in a community. In my municipality, for example, Vaughan has five swimming pools for 130,000 people. Markham, at 160,000, has four swimming pools. Presumably, if you look across the GTA, you'll find that in urban municipalities the Markham standard's probably the right one, that probably Vaughan's got one too many swimming pools.
So you can go through each of those charges and determine what the average level is. There are some abuses, and maybe a junior A team would be seen as an abuse if they had already established rinks and they were simply gold-plating them.
Mr Ernie Hardeman (Oxford): Thank you very much for your presentation. My question is somewhat in the same vein as Mr Ouellette's, the issue of level of service and how one finds the right level that should be allowed in the development charges.
In 2.4 in your presentation you talk about the 10-year averaging being inappropriate because it will prohibit rural municipalities from increasing their level of service. My question really would be, would that not be appropriate? In fact, should rural or any other municipalities be allowed to use the development to upgrade the level of service? If the level of service is here and the new development is up here, at some time in the future is not that new development then going to be asked to pick up the cost of upgrading the other residents in the municipality? So is it not fair that they also cover some of that upgrading for the original? It would seem to me still appropriate to have a level of service, regardless of how low that community presently is.
Mr Hermsen: The one instance I was involved with, for example, was a rural township with a number of settlement areas. There was one settlement area, though, that was going to experience growth. It was going to go from 800 people to 2,000 people. The township's consultants and the development's consultants said: "We're going to need a proper water supply. We can't just get by with what we've got. We need a better level of service." This was recognized by the developers as well. At that time, and this was a few years ago now, we used the old Development Charges Act to say what the right share was for the people who already lived there, because with the new system came the opportunity to hook up, so there was a benefit to them as well, and what the right share was for the new development. It was all worked out.
The other side of the coin is, without it we wouldn't have had a good, workable tool to help the industry move forward. It would have been: "How are we going to fund this? Every person for themselves, or does the existing taxpayer have to take a big bite to move forward here?" There has to be some balance.
Mr Hardeman: Finally, on the question of how we should fund it, my concern is that under the present structure it becomes too easy to say, "Let the new homeowner coming into the community pay the bill, because they are not our present community, so we can get the funding from outside our community to build the higher level of infrastructure." I think that's somewhat unfair. How should we fund it? is really the question I think we're trying to address with the development charges.
Mr Hermsen: I agree.
Mr Gerretsen: That's precisely the question: How should we fund it? It's our position that that's best determined between the individual municipality and the developers that are actually there, because getting back to your swimming pool example, I suppose the fact that there were more pools in the one place than the other place presumably made it a more attractive community, and that's precisely the reason why people want to develop there. Do you have any comments on that?
Mr Livey: The dilemma here isn't that we would be prohibiting a municipality from having something greater than a certain level of service that you couldn't add pools or other things to; the question is, what is the level that should be attributable to development normally?
When you look across the GTA, and I know these figures, on every one of the services, most of the municipalities charge almost the identical level of service. There are a few exceptions higher and a few exceptions lower, and no one municipality is excessive in all categories. It varies all across the board. In that story, in those graphs, are the essential levels that everybody agrees with more or less. It's there, ready for some regulation to say, "That's the level we're going to pick and use for now in the GTA," and we won't have to go to this average-cost thing.
As Bernie was saying, for an urbanizing municipality to be just coming on stream, they're really caught, because their municipal residents see the services next door, from East Gwillimbury into Newmarket they see those services, they use those services to a large extent and yet they can't get the capital together to build those services in their municipalities on the basis of their tax base.
Mr Gerretsen: But would you not agree with me that in the case where the one municipality has got the higher level, it's the marketplace that eventually will bring it down to some sort of a norm, from a planning viewpoint, or else development will just completely stop in that municipality and then the political process itself will bring it down?
Mr Livey: Yes. The problem in some of our municipalities is that they don't have an awful lot more space for the type of development that's going in. Newmarket and East Gwillimbury is a good example. The new development in Newmarket is rapidly filling out that municipality and it's spilling over into East Gwillimbury, which is ready to take its role as an urban place at some time in the region but as yet hasn't got the capacity to do that. It's the upfront dollars.
The Chair: Thank you very much. Our time is expired. On behalf of the members of the committee, I thank you for coming this afternoon with your advice.
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
The Chair: We'd now like to call Mr Mundell from the Association of Municipalities of Ontario. Welcome. I'm sure you know that you have to introduce yourself for Hansard and that your presentation time is 20 minutes.
Mr Terry Mundell: My name is Terry Mundell, and I'm the president of the Association of Municipalities of Ontario, councillor from the county of Wellington and reeve from the village of Erin. With me today is Patrick Moyle, who is the commissioner of corporate services with the city of Brampton.
Ontario's municipalities are the province's primary partner in governing Ontario and in financing critical public services and infrastructure investment. As elected governments, they are responsible for the economic and social wellbeing of Ontario's communities. An important part of that responsibility is the management of growth in Ontario's communities, including planning, capital budgeting, development approval and the provision of community services.
Municipalities also safeguard the interests of property taxpayers. The property taxpayers who elect Ontario's municipal governments currently contribute over $14 billion annually towards important public services. It is an amount almost equivalent to Ontario's personal income tax revenue. Services for residents and businesses are also financed through other means such as user fees, special area taxes and development charges.
The bottom line is that there are services current and future residents need and services they demand, all of which have to be paid for one way or another. Municipal governments are responsible for that bottom line, and they're accountable for providing the balance in the overall equation.
Municipalities bear an enormous responsibility as partners in government in Ontario. As elected officials, municipal councils enjoy straightforward accountability to taxpayers, and we carry on the business of government in a manner that is more open and more accessible than either the provincial or federal governments.
The current provincial government's commitment to comprehensive legislative reform to deregulate the management of Ontario's municipalities is a very important step forward in streamlining public administration in Ontario. For many years, municipal governments have been over-regulated. A new, permissive legislative framework for municipal government means that the people of Ontario really can have better government at lower cost.
But the government is sending mixed messages. Bill 106, the Fair Municipal Finance Act, clearly establishes municipal control of local tax policy and, in doing so, reinforces the government's commitment to local autonomy. With Bill 106 strong, independent and autonomous local governments will be well positioned to meet the needs of our communities into the 2lst century.
How can we reconcile such positive reform with Bill 98 changes that replace permissive financial arrangements with a prescriptive and more highly regulated framework? If the answer is, as I suspect, that the province has an interest in lowering the cost of housing, then surely there would be a mechanism that guarantees that the developers' cost savings are passed through to the consumer. But we all know that housing costs are driven primarily by market forces, more so than by the cost of providing homes and businesses with local services.
Development charges are a critical component of municipal revenue. In 1989, the current Development Charges Act was introduced to provide a legislative framework to allow municipalities and the development industry to plan for adequately financed growth in our communities. The basic tenet of the act is that development pays its own way. No one has presented any reasoned rationale as to why this approach is no longer appropriate or why it should be tampered with.
The current act ensures that the real capital cost of development is borne by developers and new owners, rather than by the existing taxpayers who have already paid to build their communities over the years.
Generally speaking, the current act works well. It is true that a lack of clarity within the act has led to differing interpretations and some inconsistencies in its implementation. There are also elements of fine-tuning that can be done in light of experiences with first-generation DCA studies and bylaws. The current act provided us with a stable framework that we can build upon. Starting over with a new act does not make sense.
Like David Crombie's Who Does What advisory panel, AMO believes that the scope of the current act is reasonable and fair. Municipal councils have to justify infrastructure services and costs in terms of projected growth and capital requirements. The act allows municipalities to determine the appropriate level of capital investment consistent with the long-term planning goals of the community.
In most communities in Ontario, there are no development charge levies. In most of the communities where development charges are levied, they are considerably lower than the levels permitted under the act. They are lower because municipal governments consider local circumstances, including economic development and market competitiveness, and they make policy decisions based on substantiated rationale.
One of the most important features of the current act is that it is permissive. If municipalities do not want to charge developers, then they are not required to do so. The act also sets out a process to ensure that development charges policy is applied in a fair and open fashion, with public meetings and an appeal mechanism. If the charge is considered unfair by the public, developers or other stakeholders, it can be appealed. Relatively few development charges bylaws have been set aside by the Ontario Municipal Board under the current act.
As a key indicator of the province's economic vitality, the development industry plays an important role in the province's economy. Development creates jobs and improves the economies of municipalities by expanding the assessment base. Most communities welcome growth, and they welcome new residents and business investment. We all benefit from competitive development costs that encourage growth and investment in Ontario's economy. But development also brings new costs to Ontario's communities.
We know that sound, sustainable growth and development in Ontario's communities are dependent upon a well-planned and solid infrastructure and adequately financed, affordable public services. We also know that the provincial government has no intention of making any financial contribution to the financing of growth in our communities, so it falls entirely to municipalities to ensure that adequate financing is available. It is a critical component of success.
Successful growth relies on real partnerships between municipalities and the development industry. In fact, municipalities and the industry are partners in economic growth and sustainability. It is a partnership that has worked well and needs to work well in the future. It's a relationship that is built on cooperation and common objectives. Forced, prescriptive rules will do nothing to foster cooperation or productive relationships.
The current relationships between municipalities and developers are evolving as times change, and times are changing very rapidly. Who Does What will accelerate change very dramatically between now and 1998. The expectations of municipalities, taxpayers and new homeowners will also evolve and change. Most municipalities are examining what services and service levels they need and can afford, as well as new ways of delivering and financing those services. Municipalities need the flexibility to respond to such change and the autonomy to plan for it.
Competitive pricing of growth-related capital investment will facilitate new and innovative financial arrangements between municipal governments and the development industry. DCA or any other legislation should not present regulatory or practical impediments to new and innovative financing arrangements, including public-private sector partnerships. The DCA should encourage change and facilitate innovation.
The adequate financing of growth-related capital costs is a critical element in the viability of Ontario's communities, in fairness to existing and future taxpayers and in the success and marketability of development projects.
The principle of fairness is vitally important. Asking municipalities to subsidize development is to ask existing taxpayers to subsidize development. Surely no one would suggest that this is a fairer arrangement than the one that currently is in place.
Municipalities also want to be fair to the development industry. Development charges or other growth-related capital cost financing are intended to pay for growth. Municipalities are not asking the development industry to finance new municipal service responsibilities or to compensate for the elimination of provincial financial support for local services.
In fact, evolving municipal service responsibilities and the changing expectations of taxpayers will probably lead to fewer and smaller development charges. The capacity to operate and maintain services tied to growth-related capital investment is a key factor in planning for growth and determining or reviewing services and service levels. As operating funds become more scarce, capital projects will reflect new realities and new ways of financing investment.
Ontario's municipalities do not believe that Ontario needs a new Development Charges Act. We acknowledge that the current act would benefit from revisions to lend clarity and transparency to the process of determining and administering development charges. The statutory framework set out in Bill 98 is not acceptable to municipalities or to Ontario's property taxpayers. In fact, the proposed legislation will limit the capacity and tolerance for development in our communities, because it is a recipe for property tax increases.
Bill 98 seriously erodes local autonomy and undermines local responsibility and accountability for local tax policy. Municipal governments are elected to manage their communities in a manner that reflects local circumstances and local priorities. Arbitrary and unilateral decisions made by the province and codified in legislation seriously undermine that principle.
Bill 98 not only fails locally, it fails on a macro level as well. The province has indicated that municipal governments will be fully responsible for the delivery of infrastructure services, but Bill 98 substantially restricts needed autonomy and authority to fulfil those responsibilities, and it destabilizes municipal revenues.
Although a detailed list of AMO's recommendations for modifications to Bill 98 is attached to this presentation, there are four areas of key concern for Ontario's municipal sector and for AMO that we would like to highlight. The four issues are: mandatory municipal subsidies for development, mandatory copayment, the retroactivity of Bill 98 provisions and process.
Bill 98 mandates four forms of municipal subsidy for development: 10% for hard services such as fire, police, transit, stormwater management, electrical utilities and waste management; 30% for soft services such as libraries and recreational facilities; the expansion of industrial uses; and ineligible services.
The municipal sector does not support any erosion of municipal authority to levy development charges. The provisions that set out a 10% and 30% municipal share of development costs are inappropriate and unacceptable. AMO is encouraged by the minister's commitment to this committee that he will introduce amendments eliminating the provisions in the bill that require a 10% municipal contribution for roads, sewer and water services, hydro, fire and police services.
But why should a resident be charged 10% of the cost of storm drainage for a new development? Why should they be required by law to contribute to the costs of providing waste services that would not be needed if there was no growth? Why should the government force property taxpayers to pay 10% of the cost of transit services to serve a new community that is still on the drawing board, or 30% of the cost of a new library that does not serve an existing neighbourhood? Residents have already invested in the infrastructure of their communities when they bought their homes. Why should they be asked to finance growth as well?
It really is a question of principle. In many communities, Bill 98 will not lead to lower charges to developers. As we have noted, most communities do not charge developers the full amounts permitted under the act. There are many reasons why councils charge less than they are permitted to charge. In some cases, it's to be competitive in the development market. In other cases, it is because the growth-related capital investment will benefit the community as a whole. Under a new arbitrary and prescriptive framework, some developers will almost certainly end up paying more than they do now.
Bill 98 provisions that make certain growth-related investment ineligible are also unnecessary and wrongheaded. Municipal councils are elected to make decisions about how a community is managed. These decisions are made in open, public meetings. Together with the community, councils make decisions that reflect local priorities. It is what they are elected to do. An appeal mechanism is in place but, as I commented earlier, it is seldom needed and rarely used to overturn a development charges bylaw.
The principle behind a development charge reduction for expansions to industrial sites that do not use or require the level of service that a new industrial site would need is relatively sound. That the level of reduction should be established in an arbitrary fashion, with a total disregard for local circumstance, is not sound. The amount of the reduction must be based on local circumstances if it is going to be appropriate and reasonable. It's a decision that must be made by an elected municipal council, not by Queen's Park.
It is not necessary for the provincial government or for Queen's Park bureaucrats to decide what is or is not appropriate for a community to build, or to place restrictions on how investment is financed. If communities are unable to offer amenities to new and old residents, businesses and industry, the communities become a less attractive place to live or invest. When that happens, we all lose, including the developers trying to market their products.
While we acknowledge that the concepts of "benefitting" and "existing capacity" are appropriate considerations, we believe that the provisions of Bill 98 that mandate a municipal subsidy for development should be eliminated.
We've said that Bill 98 provisions that mandate a municipal subsidy to the industry are inappropriate. They are contrary to this government's policy of permissive legislation for elected municipal governments. The provisions are detrimental to our communities and to Ontario's current and future property taxpayers.
The provisions in Bill 98 under which the copayments are set out are also practically and systematically unsound. They reflect a very limited knowledge of municipal finances.
Bill 98 mandates a municipal copayment for key development-related costs. For example, if growth necessitates an investment in library services, the council must turn to the taxpayers for a 30% share. As the bill is written, those new tax revenues must be raised, allocated and invested in the project as a condition of the municipality accessing the development charge funds.
Aside from the obvious concern that development will drive local tax policy and result in tax increases for existing residents, the system will not allow construction until the municipal financing share is available. It means that a municipality's financing capacity will dictate the timing and marketing of development projects. Where there is no inclination to increase property taxes, development could come to a standstill. Making municipalities financially responsible for a portion of growth-related costs is an ill-conceived approach for dealing with service level standards.
Bill 98 further compounds the flaws associated with copayments and the mandatory subsidy of some services by introducing retroactive adjustments that will undermine sound financial planning and cost property taxpayers money.
If the exclusion of certain services survives in the bill, retroactive ineligibility will reverse decisions made by municipal councils in good faith and in accordance with current provincial statutes. Such a move is as unreasonable as it is unfair. In many cases, such services have already been approved, financed and built. Unless ineligible services are grandfathered along with the infrastructure and capital planning approved for lots and blocks of record, retroactivity will place significant financial burdens on municipalities.
There are some aspects of process changes set out in Bill 98 that are positive. In a number of areas, however, changes that are generally sound need to be improved upon to make them work well for all concerned.
A process that makes the preparation of a development charges bylaw and background studies transparent for both the industry and taxpayers is supported. However, the cost of these studies, including growth studies, must be clearly recoverable in a development charge bylaw.
The bill's approach for an appeal of a development charges bylaw and amending bylaw is also generally supported. However, the provisions for sending a development charge complaint to the Ontario Municipal Board after a council has made a decision on the complaint should be removed. Altering a development charge on a case-by-case basis is a policy decision of an elected, accountable council, not the OMB. The only time a complaint should go to the OMB is when a council fails to make a decision within the allotted period of time, which is currently 90 days.
Council decisions are guided by rules that legislation requires as part of the development charge bylaw. These rules must set out whatever development charge is payable in a particular case and what exemptions there will be for these types of development.
Municipalities must also be able to link the planning approval of a development project to the external services to a site that need to be constructed prior to development. Bill 98 prohibits this important step. It is unclear why the prohibition is being proposed. The process for setting a development charges bylaw is public and transparent. The development charges bylaw is appealable, as are the conditions for development approval of a planning application.
If this misguided prohibition is enacted, municipalities may find themselves being required by the courts to extend services to a development site by virtue of having approved the development application and having a development charge bylaw in place. As a result, the financial management capabilities of municipalities will be under incredible and unpredictable pressure. Municipalities must be able to somehow link development approval with offsite services as a condition of approval.
Municipalities across Ontario all want the same thing. They want stable and predictable revenues that match their service responsibilities. They want financial stability that allows them to plan for growth and to make the necessary investment in local services.
The province has indicated that it does not want to be involved in the management of local services. Those are the responsibility of municipal governments, and the province has committed to reforming municipal legislation to ensure that we are allowed to carry out the business of local government in an efficient manner. The province maintains that the days of provincial over-regulation and red tape are over, yet Bill 98 contradicts that commitment. It will replace a reasonable and fair piece of legislation with an overly prescriptive one. The result will be a needlessly complex and confusing administrative process. It confounds our business by asking us to subsidize development and by asking current property taxpayers to pay for growth.
In the Common Sense Revolution, this government committed to working with municipalities to ensure that its decisions did not lead to property tax increases. Bill 98 is a major departure from common sense, and its provisions do much to harm Ontario's communities and their capacity to grow.
The Chair: Thank you very much. I know there are a number of people who would love to ask you questions, but unfortunately our time has expired. Thank you for your brief.
Mr Sergio: Can we extend the time?
The Chair: No. We have other people waiting.
Mr Gerretsen: On a point of order, Madam Chair: With all due respect, this organization represents all of the municipalities in the province of Ontario. Surely the membership of this committee would allow one question per caucus of this organization. I would request that unanimous consent be given so that we could at least have the decency to ask them one particular question on their presentation. Otherwise, Madam Chair, I would suggest to you that it's just a method that's being used to stifle the view of municipalities across Ontario.
The Chair: A request has been made for unanimous consent. Do I hear unanimous consent?
The Chair: I do not hear unanimous consent. Thank you very much for your presentation. We do appreciate it.
Mr Gerretsen: You guys are absolutely beyond belief. You just don't want to hear any criticism.
The Chair: Order, please. Are the presenters here from the Ontario Federation of Indian Friendship Centres? No? Then from the Ontario Hospital Association?
ONTARIO HOSPITAL ASSOCIATION
The Chair: Is this Mr Egan?
Mr Dennis Egan: That's right.
The Chair: Mr Egan, thank you very much for being here early. We do appreciate your being here.
The Chair: Colleagues, our next presenter awaits our attention.
Mr Egan: Good afternoon. My name is Dennis Egan, and I'm president and CEO of the Mississauga Hospital. On behalf of the Ontario Hospital Association, which I represent today, I would like to take the opportunity --
Mr Gerretsen: On a point of order, Madam Chair: There's another presentation here, the Ontario Federation of Indian Friendship Centres.
The Chair: I'm sorry, they aren't here.
Mr Gerretsen: In other words, we had somebody else here that we had some questions of, and there are 20 minutes left --
Mr Galt: You're consuming this gentleman's time. Have some respect.
The Chair: On a point of clarification, we did ask if these people were here. They were not here. We've moved on to the next presenters, in the usual fashion. If they do turn up, we will ask them to present after this gentleman. Mr Egan, I apologize. I ask you to go on.
Mr Egan: I'm pleased, on behalf of the Ontario Hospital Association, to be here to present to this committee on Bill 98.
Bill 98 gives municipalities the power to make bylaws that require those who develop land to pay for increased capital costs required because of increased needs for service arising from new development. OHA supports this proposal.
However, the bill specifically prohibits a municipality from imposing a development charge bylaw to pay for the increased capital costs required because of increased needs for public hospitals. OHA strongly disagrees with this proposal, as it renders public hospitals an ineligible service and thereby eliminates a vital source of funding previously accessible to hospitals to meet their increased capital requirements resulting from new development.
There are areas of the province which are experiencing, and are expected to continue to experience, extraordinary growth in population along with a corresponding demand for many hospital services. The areas where the development charge issue is currently most significant is the greater Toronto 905 area. This includes Halton, Peel, York and Durham. The Ministry of Health's planning tool, called the planning decision and support tool, projects that the demand for acute care hospital services in the GTA-905 area alone will continue to grow at a rate greater than 4% per year over the next 10 years. Other areas which are experiencing high growth, at about 2% per year, include Simcoe, Waterloo, Wellington and Renfrew.
The GTA-905 hospitals currently provide direct care for approximately two million people. The planning decision and support tool projects that these hospitals will care for an additional 800,000 patients by the year 2006, assuming that the existing rate of referrals to Toronto hospitals continues. By consequence, Toronto hospitals will also see an increased demand for specialized care for residents in high-growth areas.
An analysis of growth between 1976 and 1993 has demonstrated that hospital utilization for births, emergency services etc is directly proportional to the increase in population. For example, between 1976 and 1993 in the GTA-905 area the number of births increased from 16,719 to 32,546, an increase of 95%. This is directly proportional to the population increase in the GTA-905 area.
Extraordinary growth with corresponding demands in services also exists, and will continue to exist, for other hospital programs such as cancer, cardiovascular diseases, ambulatory clinics, emergency, neurosurgery, psychiatry, laboratories and rehab services.
However, the physical plant infrastructure of Ontario's hospitals has not always grown at the same pace as the delivery of services. As the growth in caseload continues, hospitals will need to initiate capital projects in order to accommodate the service growth. Given the demographic realities at present and forecast for the future, accessibility to all sources of funding is necessary to meet these needs.
Hospitals are extremely limited in their source of funding for capital projects. The primary source comes from the Ministry of Health. In June 1996, the ministry reduced its funding commitment for hospital capital projects from two thirds to one half of the total cost of a project. The losses we are experiencing due to diminishing provincial commitment to capital development will result in a greater pressure to obtain funds through fund-raising initiatives in the community.
The fiscal realities of present-day Ontario have forced hospitals to become involved in large-scale fund-raising campaigns, not only to accommodate increased capital requirements due to growth pressures but also to meet existing capital requirements. It has never been easy for hospital communities to accommodate their one-third share of the costs of capital projects, so let me assure you that today and in the future it is and will continue to be even more difficult for hospital communities to find a one-half share of these costs.
While OHA can appreciate that it is a community responsibility to accommodate a portion of the capital costs of a project for its hospital, we would submit that municipal governments are part of that community and they have an inherent interest in sustaining a community's socioeconomic position.
In this regard, each municipality should have the authority to determine what is in the best interests of its own community. In support of that authority, a municipality should have the ability to impose a development charge bylaw requiring those who develop land in a particular region to pay for the increased capital costs required because of increased needs of public hospitals which result from such development.
What is perplexing is that the proposed legislation will withdraw a source of capital funding for growth at the very time when the Minister of Health has made a decision to recognize growth in population in the funding of hospitals' operating budgets. It does not make any sense to accommodate growth on the one hand and to withdraw support for it on the other. To be able to plan for growth in its community, a municipality requires the authority to accommodate that growth as it so determines, through the application of development charges for the increased essential services required by that growth.
There are certain essential services that any community needs: access to hospital care, fire protection, safety, sanitation etc. In reviewing proposals and plans for new development in an area, municipalities need to give consideration to the infrastructure required to support the new development, including the provision of these essential services. These services are considered so essential to the community that the population often assumes that these services will be available to them. In fact, there may be an assumption that in planning for this new development, municipalities and developers have duly accounted for these services. The residents assume, and have the right to expect, that the essential services will be available.
Recent polling confirms that people want reasonable access to high-quality hospital services. Therefore, where new development is proposed, a municipality must assess what services, especially hospital infrastructure, are going to be necessary to meet the demands of the increased growth due to the new development. Municipalities, therefore, must have the authority to make a bylaw to impose development charges for these increased demands for hospital services.
OHA fails to understand the rationale for the proposal that permits a municipality to make a development charge bylaw in respect of capital costs for police and fire protection but specifically prohibits the municipality from making a development bylaw charge with respect to capital costs for public hospitals. If police and fire protection services are essential, then hospital services are equally essential. In fact, each needs the other in order to provide their services more effectively.
To illustrate with two examples, first, a fire in a home: Firefighters attend at the scene and rescue the inhabitants. The inhabitants sustain serious second- and third-degree burns to their bodies and are immediately transported to hospital to receive emergency care. While the firefighters have performed an essential service in rescuing the inhabitants, the injured parties now require the immediate services of a hospital. The hospital service is just as essential as the service provided by the firefighters.
In another example, under the Mental Health Act a provision exists whereby a police officer has the authority to take a person to hospital if that person appears to be suffering from a mental disorder and is a serious threat to himself or others. The police officer has clearly performed an essential service to the community by dealing with the individual in crisis. However, the police officer cannot fulfil his or her statutorily mandated duty unless he or she has access to a hospital.
Having illustrated how hospitals provide essential services, we are at a loss to understand the province's proposal to treat hospitals in the same manner as entertainment facilities such as museums, theatres and art galleries; tourism facilities, including convention centres; and parks. While we believe that these services are desirable in any community, they are not essential.
The socioeconomic viability of a community is in large measure sustained by the presence of industry and commerce. Industry and commerce are attracted to a community that has the services necessary to support the needs of their employees, including hospital care. Attracting and maintaining industry and commerce in that community through the provision of services, such as hospital services, makes sense economically and benefits the municipality generally.
The major difference between Bill 98 and the existing Development Charges Act is a limitation on services and the costs for which development charges can be imposed for those services. One of the limitations being imposed is hospital services. It has been suggested that the moneys realized from the imposition of these limitations will be directed towards further new development, thus promoting job creation. However, over the past several years development charges to support capital costs for hospital services have been in existence.
In Peel region, and indeed throughout the GTA, which has experienced and continues to experience tremendous growth, developers have not been inhibited from undertaking further new development, notwithstanding that the municipality has exercised its ability to make a bylaw to provide for development charges for capital costs for hospitals.
Each municipal government, rather than the provincial government, is keenly aware of the needs of its own community and is in the best position to determine what should be done to accommodate those needs. Where new development is undertaken in a region, the development impacts on the population growth in that area. Members of that increased population will become ill, sustain injuries in the home or workplace, be involved in motor vehicle accidents, suffer heart attacks, give birth etc. As the population increases, so will these types of incidents.
However, the existing hospital only accommodates the existing population. If the demands for increased hospital services as a result of growth are to be met, it will require increased capital costs. Therefore, the municipality must have the authority to impose development charge bylaws if, in its discretion, it determines that a need exists to accommodate the increased capital costs for hospital services.
OHA and its members can find no rationale for a proposal that allows a municipal government to impose a development charge bylaw to accommodate such items as library books and compact discs, swimming pools and fitness centres, tennis courts and baseball diamonds, motor vehicles and even lawn mowers, yet prohibits the municipality from imposing a development charge bylaw for capital costs to meet the needs for increased hospital services.
OHA recommends that municipalities have the authority to make development charge bylaws to pay for increased capital costs for hospitals which are necessary because of the increased needs for services arising from development.
I'd be pleased to answer any questions if time permits.
Mr John O'Toole (Durham East): Thank you very much, Mr Egan, for your presentation. It's an interesting point of view. I'm from the Durham region, which you mentioned is one of the high-growth areas, with GTA and 905. They don't have a development charge as part of their formula today for hospitals, although as I look at the acute care studies or the district health council's report, I wonder if we'd still have the seven hospitals after the restructuring commission. I think there are maybe a few surplus hospitals, if anything. I'm not suggesting there shouldn't be improvements to hospitals.
I'm going to ask you a question. Out of the some 800 municipalities in Ontario today, how many have a development charge for the hospitals, outside of York?
Mr Egan: There's York, Peel and I believe Halton, but I stand to be corrected. I believe those are the three.
Mr O'Toole: So it's not widely utilized today?
Mr Egan: No, that's correct.
Mr O'Toole: Would you feel that perhaps the current review of the Health Services Restructuring Commission today might indicate a greater provincial responsibility in some areas, perhaps health care, as you look to the future, and less for the hard and soft services at the municipal level? Do you see that's kind of what's going on here?
Mr Egan: On the restructuring of hospitals, I believe once the restructuring commission leaves York, Durham, Peel and Halton, they will have actually recommended significant additional funding, operating dollars for the four municipalities, because the amount of resources currently made available is significantly below any standard, and that's going to require a significant capital investment.
Mr O'Toole: Yes, but the capital right now is shared provincially and basically fund-raising. That's how it's paid for today. Right?
Mr Egan: If I could comment on that, the fund-raising, yes, although if I could use Peel as an example, our capacity to fund-raise is about $5 million a year, and virtually all of that money goes to support new equipment rather than new facilities and services.
Mr O'Toole: It's an interesting dilemma.
Mr Hardeman: Thank you for your presentation. I was just wondering, going on with Mr O'Toole's comments about how widespread the development charges for hospitals presently are and the fact that it is only centred in the 905 area, I guess we would call it, of the province, is there not a concern that it's being unfair to the new residents in those areas? Obviously there's need for health care in other parts of the province too. The provincial taxpayer is going to pick up any expansion that occurs there. Is it not unfair that residents in those specific areas would pay, first of all, on their new home and then be expected to pick up the tab for expansion throughout the province?
Mr Egan: Just to comment on that, first of all, we've had lot levies and development charges for many years in Peel. I think the unfairness would be all those people who have paid over that period of time now being potentially asked to pay in terms of community fund-raising.
Your point in terms of the province as a whole, I think we have to draw a distinction between the growth aspect of hospitals and the replacement of hospital facilities. That's not what we're asking here.
In the same way that our hospital, for example, has a $5-million infrastructure project to replace our whole dietary department, that is not eligible for these development charges. We have to find the money, and our community, through the Ministry of Health 50% funding, would be responsible for that.
To answer your question, the residents of the 905 area are still responsible, like every other community, for the modernization of their hospital. What we're speaking of here is new residents creating new demand for hospital facilities. In Peel, it's very clear that we can't get any money for modernization; we can only get it for growth in services.
Mr Gerretsen: First of all, my apologies to you for interrupting or disrupting your presentation. It certainly wasn't aimedat you but rather at the dictatorial majority of this committee who don't want to have other people who disagree with them have their say.
I find it kind of interesting that if only York, Peel and Halton in effect have development charges as they relate to hospital construction, these are probably also the three major growth areas in the province. So these presumably would be the areas that would require any new construction of hospitals to take place in the future, and yet with what's happening in the Ministry of Health, it seems to me that the restructuring commission, at least so far, has only dealt with the closing down of hospitals rather than the recommendation dealing with the building of new hospitals in some of these areas. Did you find that there's some inconsistency in that approach?
Mr Egan: First of all, the OHA does support hospital restructuring. It's been on record, the consolidation of hospitals, "Let's protect the patient programs and eliminate facilities." I don't think that's as relevant in York, Peel and Halton. In Peel, for example, we have three hospitals. There are 800,000 people and pretty soon there will be a million people. We're not going to see the consolidation of hospitals in Peel.
What we're talking about here today really is future growth in that area and how do we not necessarily build a new hospital but expand those three physical hospitals. Your point about the inconsistency, it may have been in the past. We may have been looking at a fourth or a fifth hospital in Peel, but I think what we would see now is expansion of the existing sites rather than building and then potentially down the road restructuring and coming back to three sites.
Mr Gerretsen: Where I have great difficulty is, if this only applies in three parts of the province and those three parts just happen to be the fastest-growing areas in the province regardless, why a government would in effect deem it necessary to withdraw this kind of development charge from the development charges concept. It doesn't seem to make any sense to me, and I assume it doesn't make much sense to you either, from the presentation you just gave.
Mr Egan: That's right. Quite frankly, it's difficult to get the profile raised on this issue when it only affects a small number, but we're pleased that the OHA has supported us with significant support. They're recognizing the issue and they asked me as one of the CEOs of the hospitals in that high-growth area to bring the message here today.
Mr Gerretsen: Thank you. I yield the rest of my time to the member from the third party.
Mr Pouliot: I wish to thank you for taking the time to make the presentation that you have today. By your title and also by virtue of your presentation I sense a dedication. I know that your courage is great, for you are about to embark on and sail uncharted waters, for it has been decreed -- and you make mention of the demographics -- that the padlock is about to be the order of the day in many, many institutions, yet we see so well illustrated that the demographics point in an opposite direction. I just wonder, and you must agonize over this, where this will lead us. Friends are people whom you treat a little better, not a little worse. The time has arrived to reward under the present system those who have served so well in the past couple of years and the months leading to the last election.
I have two questions. Do you find, sir, that there is a lot that is broken with the present system?
Mr Egan: I'm not sure that relates to development charges. I think you have to look at it in a balanced way. I think over the last five years there are some significant improvements in care. If I can just use the example in our hospital, people used to get their chemotherapy treatments in the halls and, thanks to a donation from a member of the public, we now have an excellent suite and in fact we're able to deliver the care more cost-effectively. So I think if you really look at it in a balanced way, there are some significant improvements in care.
On the other side, there's no question we're relying more on families and we have shorter lengths of stay. That's not necessarily translating into worse outcomes. The evidence is that the public is rising to the challenge of supporting loved ones and the outcomes are being achieved.
The question is, where does the future go? Because you're right, the future, we don't know. We have to do our best and rely on our clinical staff and working together with the management staff to make the best decisions possible.
Mr Pouliot: You're right, I too was referring to Bill 98. You mentioned in your recommendation, and allow me to quote, with respect, "OHA recommends that municipalities have the authority to make development charge bylaws to pay for increased capital costs for hospitals which are necessary because of increased needs for services arising from development." I've taken from your wording that you are referring to a new class of taxes dedicated, in other words, for that specific purpose, focused on what you say here, "increased capital costs."
Mr Egan: I'm not sure I'm referring to a new -- I think this is something that's been in existence since development charges were allowable. All we're suggesting is that municipalities continue to have the authority.
Mr Pouliot: Would you like to have the capacity to levy? You don't have that capacity at the present time.
Mr Egan: I think we're in a difficult position to do that because our boards are not elected. They do represent the community, but I think ultimately taxation has to be linked to that accountability that goes with being publicly elected.
The Chair: Time.
Mr Pouliot: One last supplementary. I'd appreciate it, madam.
The Chair: Very, very briefly.
Mr Pouliot: I see that the government du jour, the government of the day relies heavily on the capacity of people to fund-raise etc. I look at Princess Margaret and their glossy literature and I want to wish them well. Do you see this as being a game left to chance when we're talking about the most essential of services, the most essential of the human dimension, which is the collective health of the people of Ontario? Do you think it should be left to a lottery system or the whim of one to buy a ticket as opposed to another? Surely they can't be serious?
Mr Egan: My own view is that those lotteries seem to be doing very well but only for select hospitals that have a big profile like Sick Kids and Princess Margaret. The three hospitals in Peel, for example, got together with a similar venture and it didn't lose money, but it didn't make a lot. I think that's why we're really coming back to development charges as an important source of funds.
These dollars are being used right now to expand Credit Valley Hospital. Since Credit Valley Hospital was built in 1985, there have been 170,000 people added to Mississauga. This is one of the first capital projects. Our own hospital has some projects that we have sought support for from the Peel region and right now those dollars are currently available. What we're concerned about here is really the next generation in effect, that the services are protected for them.
The Chair: Thank you very much. An exciting beginning but a very solid presentation. Thanks again. We appreciate it.
CITY OF THUNDER BAY
The Chair: I'd like to now call Mr Stadtlander from the city of Thunder Bay. Welcome, sir. We appreciate your being here.
Mr John Stadtlander: Thank you for the opportunity to address the standing committee with respect to Bill 98. My name is John Stadtlander and I am the manager of current planning for the city of Thunder Bay. During my presentation today, I will outline the unique approach that the city of Thunder Bay has taken to date with respect to development charges, provide the committee with the city's comments on how it is anticipated that Bill 98 will change the way development is financed in the city and suggest several amendments to Bill 98.
Development financing prior to the Development Charges Act: The city of Thunder Bay has always funded the construction of trunk services, such as arterial roads and interceptor sewers, from general revenues. Consequently, before the present Development Charges Act, the city did not have any lot levy program in place. Local service installation to allow development to proceed was accomplished through the provisions of the Local Improvement Act or by conditions imposed as a result of a consent or subdivision approval.
Typically, a developer of a plan of subdivision was required to construct both the services inside the plan of subdivision and any external roads or services required to connect the proposed plan to the existing service grid. Except for storm drainage, where oversizing of services was required to allow other development to proceed, the city would reimburse the developer for the cost of the oversizing.
Development financing after the Development Charges Act: The present Development Charges Act does not allow the construction of local services external to a plan of subdivision to be required as a condition of subdivision approval. When this legislation was proclaimed, the city considered whether a city-wide development charge bylaw should be passed.
Having consulted extensively with the local development community and the public, the city and its hydro commission decided not to implement city or area-wide charges. However, city council still wanted developers to finance the cost of the local or direct services required for their developments. Therefore, the council adopted a program where site-specific development charge bylaws would be enacted for each site-specific proposal in order to provide any offsite services required. These site-specific bylaws included only those direct services required to permit the development to proceed, such as sewers, water, roads, hydro and storm drainage facilities. Contributions towards services, such as recreational facilities, arterial roads, sewage treatment plants, police and hydro facilities etc are not required. However, in some, but not all, instances the hydro commission requires a contribution towards the provision of trunk electrical circuits into specific areas.
Since it was not council's intention to have the city construct the required services, the city used the provisions of subsection 9(9) of the present act to enter into agreements to permit the developer to construct the required services in lieu of paying all or a portion of the development charge.
This development charge program has allowed development to proceed in the same way as before the proclamation of the present act. Unfortunately, this has required a significant amount of extra work on the part of the municipality and the developer in holding public meetings and preparing development charge bylaws and subsection 9(9) agreements. To date, the city of Thunder Bay has passed 33 site-specific development charge bylaws and has entered into 14 subsection 9(9) agreements.
The city of Thunder Bay has reviewed Bill 98 and how the proposed legislation could affect its site-specific development charge program and has the following comments on the bill:
Local services: Unlike the present act, which prohibits local service installation outside of plans of subdivision from being required by a subdivision agreement, subsection 60(2) of Bill 98 allows subdivision agreements to require the installation of local services related to a plan. This is a welcome change since the city will no longer have to process development charge bylaws for services which are clearly local in nature. If such a provision had been in place in the present act, many of the development charge bylaws and subsection 9(9) agreements required to allow development to proceed in the city of Thunder Bay would not have been necessary.
However, the term "local services" remains undefined in Bill 98. This means that it is difficult to determine when a service can be considered local and when it is subject to the proposed act. For example, if a developer has to extend a water line down an existing street to reach a new plan of subdivision, and this water line passes several homes that can connect to this line, is this service still local? What is important is the determination of the minimum-sized service that is required for a plan, regardless of whether other properties can connect to it. If oversizing is required to permit other properties to benefit, then this would appear to be a development charge matter. However, since Thunder Bay reimburses developers for most oversizing costs, we would like the act to clarify that such a situation is clearly local. In other words, if a municipality funds the cost of oversizing, no development charge bylaw should be required.
We would suggest that the following definition be added to Bill 98, and I quote:
"`Local service,' for the purpose of clauses 60(2)(a) and (b), includes any service or part thereof deemed by the municipality to be a local service, having regard to:
"(a) whether the service is for the exclusive benefit of the lands to which the approval relates;
"(b) whether and to what extent the installation of the service may benefit other lands; and
"(c) whether and to what extent the service has a greater capacity in order to service lands other than those to which the approval relates."
Cofunding provisions: The city is in full agreement with the announcement of the Minister of Municipal Affairs and Housing on March 24, 1997, that the government intends to remove the requirement that municipalities contribute 10% of the costs of roads, water, sewer systems and hydro. If our municipality is required to contribute towards the cost of direct services to finance development, I anticipate that the city would review its policy of funding oversizing and providing trunk services. The city might consider the imposition of charges in order to recover the 10% municipal contribution in order to remain revenue- neutral. Effectively, the cofunding provision may force the city into enacting city-wide or area-wide charges. If this was not done, the general ratepayers would be subsidizing the direct service requirements of new development.
Local services previously constructed: Some months prior to the enactment of the existing act, the city of Thunder Bay agreed to fund the cost of extending and lowering a sanitary sewer through one developer's lands to permit lands of another developer to be serviced with full municipal services. A plan of subdivision was approved for the latter property on the condition that the developer would reimburse the city for the cost of this sewer. Since the developer wanted to develop the plan in stages, the city agreed to prorate the payments over each stage of the plan. By the time the first stage was ready to be registered, the present act was in place and a development charge bylaw was required.
Under Bill 98, this would appear to be a local service, although there may be some limited opportunity for other properties to connect to this sewer. If it can be clearly identified that this is a local service, then the city would require repayment through the subdivision agreement process. If this is not considered to be a local service, the city may not be able to use the provisions of subsection 60(3) since only a portion of the plan was originally given draft approval.
In addition, if the cofunding provisions remain, and this is considered to be a development charge issue, the municipality will now have to absorb 10% of the cost. As stated previously, if the term "local services" is defined as we have proposed, and the cofunding provisions are dropped, the city would be comfortable with the proposed legislation. Otherwise the city requests that this issue be clarified in some other manner.
Appeal period: The present act has a circulation period of 20 days and provides that development charge bylaws be circulated within 15 days of their passage for a total appeal period of 35 days. Bill 98 proposes to extend this period to 40 days. The city of Thunder Bay is of the opinion that the time periods outlined in the existing legislation are sufficient and would suggest that no change be made.
Services in lieu of payment of development charge: Under subsection 9(9) of the present act clear authority is given to municipalities to enter into agreements allowing developers to install services in lieu of paying all or a portion of a development charge. There is no similar authorizing section in Bill 98. This absence stands out when subsection 27(1) is examined. Subsection 27(1) allows agreements to be entered into permitting payment of a development charge before or after it would otherwise be payable.
Subsections 9(4) and 9(8) of the present act grant similar authority. The city is not sure why a similar enabling section for agreements contemplated under subsections 39(1) and (2) has not been added. Perhaps the word "the" in subsection 39(2) should be changed to "an" so that the section would read, "A municipality that has agreed to give a credit shall do so in accordance with an agreement."
Registration of agreements: Both the present act and the proposed new act allow for the registration of development charge bylaws. However, there is no clear authority to permit the registration of agreements permitting the installation of services in lieu of paying a development charge or for the registration of agreements permitting payment to be made before or after the charge is normally due.
The city of Thunder Bay has made extensive use of agreements to permit the developer to construct services in lieu of paying a development charge. These have been used for subdivision development where the developer is constructing both internal and external services needed for the development to proceed. A subdivision agreement, which can be registered on title, is executed along with an agreement requiring the developer to construct the external services in lieu of paying the development charge. Both of these agreements are secured by performance guarantees and it is preferable that both are registerable, so that when lots are being sold, lawyers searching title have notice of both agreements and can make appropriate inquiries to protect their clients.
Transition sections: Section 65 of Bill 98 requires that notice be given of the expiry or repeal of a development charge bylaw in order to give notice of the last day for applying for a refund of ineligible credits given under section 13 of the present act. It appears that this section applies to all bylaws. Bill 98 should clarify that such notice is only required where a development charge bylaw that has been repeated or has expired contains a charge for a service that is ineligible under Bill 98.
In the city of Thunder Bay, a credit is given under section 13 of the present act when a developer has installed services in lieu of paying all or a portion of a development charge under a subsection 9(9) agreement.
Section 69 of Bill 98 provides that an agreement entered into under subsections 9(4) or 9(8) of the old act, early or late payment, continues in force for development charge bylaws that expire or are repealed during the transition period or that expire at the end of the transition period.
The city of Thunder Bay suggests that a similar provision be given to agreements entered into under the present subsection 9(9) of the act, services in lieu of paying the charge, at least for agreements where credits given under section 13 of the present act are considered eligible credits under Bill 98.
The city of Thunder Bay normally gives developers three years to complete construction of internal or external services for plans of subdivision. The inclusion of such a section will allow for a smoother transition to the provisions of the new act. In the absence of this, the city will have to make the term of such agreements the same as the end of the transition period proposed in Bill 98. As we approach that time, developers will be faced with the situation where they may only have six months or so to complete construction. Given the climate in Thunder Bay, this can be a serious impediment to development.
In conclusion, the city of Thunder Bay recommends the following changes to Bill 98, as outlined in my presentation:
(1) Define the term "local services" as suggested in this presentation;
(2) Eliminate the requirement for a 10% municipal contribution for services such as sewer, water, roads and electrical power;
(3) Clarify that the cost of local services already constructed can be recovered;
(4) Retain the 35-day appeal period for development charge bylaws, which prior to Bill 20 was composed of a 20-day circulation period and a requirement that the bylaw be circulated within 15 days of passage;
(5) Amend the wording of section 39 or add a paragraph to give municipalities clear authority to enter into agreements to permit the construction of services in lieu of paying all or a portion of a development charge;
(6) Allow for the registration of such agreements on the title to the property;
(7) Amend section 69 of Bill 98 to clarify that agreements entered into under subsection 9(9) of the present act continue in force in the same manner as agreements made under subsections 9(4) and 9(8) of the present act and clarify that section 65 only applies to bylaws that contained a charge that would be considered ineligible under Bill 98.
Thank you very much for the opportunity to make this presentation, and I'll be pleased to respond to any questions.
The Chair: We have about a minute and a half for our questioning from each caucus and we'll begin with the Liberal caucus.
Mr Gerretsen: I take it then that currently you don't have a development charges bylaw in Thunder Bay as such. You're basically using your own arrangements with the developers, correct?
Mr Stadtlander: We use the Development Charges Act as required, so we have enacted, as I've said, about 33 site-specific development charge bylaws for the area of the subdivision alone to provide for external services or hydro, those sorts of things.
Mr Gerretsen: But I take it you had these kinds of agreements in existence as well with respect to any new development before the current Development Charges Act.
Mr Stadtlander: Prior to the current Development Charges Act, external services were required under the terms of subdivision agreement or as a committee of adjustment consent decision.
Mr Gerretsen: Would you feel then that if this act were not amended this way or if a Development Charges Act did not exist, in effect the city of Thunder Bay could work out its own relationships with respect to development and the developers who are involved in that?
Mr Stadtlander: I think the point all along is that the city of Thunder Bay has worked very closely with both the public and the local development community to come up with a solution that is unique for Thunder Bay, that works for the community of Thunder Bay with respect to development financing.
Mr Pouliot: I'm your neighbour. I've known Thunder Bay quite well over the years. That's where we go for referred medical services and to do some shopping. I live in Manitouwadge. That's 400 kilometres northeast of Thunder Bay.
I want to thank you for your presentation. The last time I talked to Mayor Hamilton, he was indicating that when all is said and done, he's now of the opinion that there's not much that is being thrown at you, that is being suggested to you, as you're about to assume a new role of an unknown cost that is revenue-neutral. In fact, he said $30 million.
Last week, I was in Thunder Bay and talked to one of your colleagues, in his capacity as a municipal elderperson, councillor, and they were up to $53 million ch-ching on the cash register -- I hope Hansard got the "ch-ching" -- in terms of the difference in cost. This is what the city of Thunder Bay, 113,000 to 115,000 people, will be asked to shoulder. I want to wish you good luck because when the other shoe falls, this will pale in comparison.
What is wrong with the present way of doing business? What is wrong with your relationship, both historical and at present, the give and take with the developer, the relationship that you have? You've indicated that it's worked quite well. Do you see this bill as tilting the balance, that you won't be able to approach your developers in the same fashion?
Mr Stadtlander: What I'm trying to get across is that we want to make sure that the bill has the flexibility for all the communities, and communities like ours, to work with the development community, to work with the public, to come up with a solution that works for the city of Thunder Bay, which has its own unique set of circumstances and may be quite a bit different than the GTA. We'd like to see a piece of legislation that allows municipalities to make their own solutions and to work with the development community to come up with what's best for the community.
Mr Hardeman: Thank you very much for your presentation. I just want to go back to the question of Mr Gerretsen about the present law that exists and the fact that you really didn't need this in Thunder Bay because you were already getting by. At that time, of course, the Liberal government was in office and they decided we needed it, but you were already getting by with the present lot levies as they existed. You dealt with it and you put a system in place that you could go through the legislation and deal with individual cases by site-specific bylaws. Is it fair to say that this new bylaw or this new legislation will generally improve your operation so that you can do it more efficiently than under the present law, doing exactly what you do?
Mr Stadtlander: As stated in my presentation, the fact that you now will be allowed to treat local services outside of plans of subdivision in subdivision agreements alone will ensure that we don't have to do as many site-specific development charges. So in that respect, yes, I don't anticipate that we would have to do as many of these site-specific bylaws, and that will allow us to get on with business a lot quicker. Therein lies our hope, that we can get some determination or allow municipal councils to make the determination of what is a local service so that we can get on with the business of developing our community.
Mr Hardeman: In your discussions that you had when you put the present regime in place, could you give me some indication as to what made the local politicians decide that only those basic hard services should be charged for, that you should not have development charges to cover your soft services in your community?
Mr Stadtlander: There was a whole series of factors that came in at the time and there was quite a discussion with the local development community. A lot of it centred around: "Let's try and keep the system operating the way the system traditionally had always worked." That was one thing.
I guess there were two big points the development community made at the time. First, they felt this would be the thin edge of the wedge of a new tax and it would grow and grow; that it might be just direct services today, but tomorrow it may be more of the indirect services. So there was a fear there.
Third, the development community saw that if we took a whole series of developments, threw them in a hat, came up with the services that we needed to support those and then put them in a development charge, and the charge obviously would be the same for everybody, that in effect was rewarding the developer who did not have as good a location to develop. Let's say he was further from services or in more rock, a more difficult property to develop. So the development community felt they should basically be charged for services on the merits of the site that they were developing.
The Chair: Thank you very much for your thoughtful presentation this afternoon. I know the members appreciate you taking the time.
CANADIAN INSTITUTE OF PUBLIC REAL ESTATE COMPANIES
The Chair: Our final presenter is Mr Daniel from the Canadian Institute of Public Real Estate Companies. Welcome. Please introduce yourselves for the record.
Mr Lorne Braithwaite: I'm Lorne Braithwaite, president of CIPREC, and with me are Ron Daniel, executive vice-president, and Mark Noskiewicz, who is a partner with Goodman Phillips and Vineberg.
Thank you for giving us the opportunity to present to you today CIPREC's overview of Bill 98. What we'd like to do is first of all give you a little bit of background on CIPREC, give you a little bit of an idea of what's happened to us in terms of taxes over the last 10 years in particular -- we do support Bill 98, we want you to know that, but we have some concerns -- and last, summarize and give you an indication of how we feel in terms of Bill 98.
Let me start out with CIPREC's role. First of all, CIPREC members endorse the basic direction of Bill 98, the Development Charges Act, 1996. However, we have some implementation concerns that are dealt with at the end of this brief.
Looking more specifically at CIPREC's role and functions, the Canadian Institute of Public Real Estate Companies is an important voice for the Canadian real estate development industry. It serves as a forum for discussion of principal issues affecting this major industry and as a vehicle for the presentation of its views to the public and to governments.
Its member firms include most of Canada's large real estate investment and development companies whose shares are publicly traded, plus real estate subsidiaries of public companies, large privately owned real estate development companies, trust companies, insurance companies, pension funds and banks.
CIPREC members pay significant amounts of taxes in Canada and in Ontario. The total property and property-related taxes paid in Canada in 1995 exceeded $1 billion, and in Ontario over $600 million, and 80% of that in Metropolitan Toronto and the GTA.
Despite the past severe recession leading to dramatically lower rents and higher vacancies, between the six-year period from 1989 through to 1994 CIPREC's annual tax survey -- these are actual taxes paid by members -- shows that taxes per square foot in Metropolitan Toronto rose by 79%, while during the same period inflation rose only 21%. At the same time that taxes soared, municipal services such as garbage collection and snow removal have been withdrawn from commercial and industrial properties and property owners pay private sector contractors for these services with no reduction in municipal taxes.
CIPREC believes that property and property-related taxes are too high and are having a negative impact on Ontario's and Metropolitan Toronto's competitive position and the ability to attract new investment and create new jobs. The introduction of development charges in 1989 has added to the overall cost of developing land in Ontario and exacerbated concerns with respect to the overall property tax burden.
Let's move on and look specifically at Bill 98. As I said earlier, basically we support Bill 98. CIPREC has firmly supported the government's initiatives aimed at achieving more equality and fairness across all aspects of municipal government, including property taxes, education programs and systems, and the cost-effective delivery of municipal services. Earlier this month, CIPREC submitted a brief in support of Bill 106, the Ontario Fair Municipal Finance Act, 1997.
In introducing Bill 98, the Development Charges Act, 1996, the government appears to have recognized that development charges under the existing regime are acting as a barrier to economic growth in this province. CIPREC strongly supports the government's intention to lower the overall cost of development charges through Bill 98.
To be more specific, CIPREC supports the following aspects of Bill 98:
First of all, the reduction in scope of eligible services. The development industry has always accepted the appropriateness of municipalities recovering the costs of hard services -- things like road, water and sewer systems -- through levies or development charges. However, under the 1989 Development Charges Act the range of soft services financed through development charges clearly became excessive.
CIPREC strongly supports the provisions of Bill 98 which prohibit development charges for cultural and entertainment facilities, parkland acquisition, hospitals, tourism facilities and city halls. These soft services are clearly facilities that benefit the entire community and they should not be financed by new development.
Second, in regard to our support, the requirement for municipal copayments: CIPREC supports the provisions of Bill 98 that would require municipalities to contribute 10% of growth-related capital costs for hard services and 30% for soft services. These provisions will add an essential element of accountability and discipline to the system, in effect forcing municipalities to only include services in their development charges bylaws which are really needed.
CIPREC is aware that the government is considering changes to these provisions, for example, eliminating the requirement for a 10% municipal contribution towards hard services. We would urge the government to hold the line on these provisions, certainly with respect to the 30% contribution for soft services.
The argument often advanced against the municipal copayment is that the new development should pay its own way. We would point out that certainly with respect to the non-residential sector, new development through job creation and increased property taxes provides significant benefits to the community. Even in the absence of any development charges, CIPREC asserts that non-residential development more than pays its own way
The third area in regard to our support; the requirement for background studies to analyse the long-term costs of new services: It is important that municipalities consider whether they can really afford the ongoing maintenance of new services before they require new development to finance the initial capital cost of such services.
A fourth area, exemption for industrial expansion: CIPREC strongly supports the exemption for industrial expansions, up to 50% of the existing gross floor area. Under the existing regime, there have been clear situations where industrial expansions have triggered significant development charges, even though the expansion created little if any demand for new municipal services.
There's the outline of the areas in particular of the bill that we support. Let's now focus on some of the areas where we have concerns.
CIPREC is concerned that certain provisions of Bill 98 run counter to the government's stated intention of reducing barriers to economic growth. In particular, CIPREC has concerns with the following four provisions.
First are development charges for transit services. Under the bill, 90% of the growth-related capital cost for transit could be funded from development charges. While the ability to impose government charges for transit services exists under the existing act, CIPREC believes that it is difficult to trace or apportion the cost of these services to growth. Moreover, with the reduction of provincial grants for transit services, if municipalities rely heavily on development charges to fund new transit services, the result will surely be major increases in development charges, offsetting any reductions that arise as a result of the other Bill 98 provisions. CIPREC supports UDI's suggestion that costs associated with transit services be apportioned equally, 50-50, between development charges and the tax base.
The second concern is development charges for waste management. CIPREC also supports UDI's suggestion that waste management facilities be funded through user fees rather than development charges. A user fee approach is more consistent with encouraging reduction and reuse. As well, with respect to non-residential development, CIPREC members typically pay private contractors for waste management services rather than relying on municipal services. In these circumstances, it is inappropriate for the non-residential land owner to be paying development charges towards waste management services which they are not receiving from the municipality.
A third area of concern is development charges for electrical services. CIPREC supports UDI's position that electrical power be treated as an ineligible service. Again, a user fee system would be a fairer, more appropriate method of recovering the costs of electrical services.
A fourth area of concern is the elimination of section 14 credits. Under section 14 of the existing act, municipalities are to give credits against development charges for prepayment of levies or the provision of infrastructure which occurred prior to the coming into force of a development charges bylaw. Bill 98 would eliminate these credits. CIPREC does not understand why these prepayments or prior provisions of infrastructure should not continue to be recognized.
In summary and in conclusion, CIPREC supports the Development Charges Act, 1996, or Bill 98, as part of the government's overall initiatives aimed at removing barriers to economic growth in this province. Earlier in this brief we made reference to the fact that non-residential development, even in the absence of any development charges, more than pays its own way when one considers the overall benefits it brings to the community. We hope the government will bear this in mind during its deliberations and decisions on the various elements of Bill 98. Thank you. We're open for questions.
Mr Pouliot: Gentlemen, thank you for your presentation. I listened intently to it. It's your point of view, and I certainly accept that some have been overrepresented in terms of paying. It brought to mind the BOT, the business occupancy tax, which is another bill, but it's closely related to this.
You'll be pleased that under the proposed legislation, which is Bill 106, there will be winners and losers. The winners will be the large bank towers. They will stand to gain the most when the tax burden shifts. The second- largest winners will be the large hotels and the third- largest will be the large apartments. On the losers' side you will have the small industrial, you will have the commercial and also the residential, so you have cause for celebration, I'm sure.
You have mentioned the hard and soft services --
Mr Pouliot: Excuse me, can we have order please? I didn't interrupt them when they spoke and I would appreciate the same courtesy.
You've mentioned soft and hard services and you've gone through pain and effort to describe them, but would you consider seniors' homes -- because they're about to be the responsibility of municipal government -- and the building and maintaining of schools to be a hard or a soft service? You're the lawyer.
Mr Mark Noskiewicz: Schools, as I understand it, would continue to be financed, or there'd be an ability to finance them through education development charges, so I don't think there's disagreement that that's an essential service and I don't think this bill changes the funding of those, at least through development charges.
Mr Pouliot: But, with respect, building them changes. It will now be the responsibility of the municipality. You will agree that schools are a very important component of any development, like a hospital, for instance. Those are essential services, just as much as a swimming pool, some would say as sewer and water. So now they're to be added to the charge. You wouldn't be opposed if this would be part of the development charges?
Mr Noskiewicz: Which?
Mr Pouliot: Schools and seniors' homes.
Mr Noskiewicz: As I said, I don't understand Bill 98 to be changing the provisions with respect to the financing of schools.
Mr Pouliot: But you see, when you look at Bill 98, you've got to look at the sidecar, because these are the new bills that are coming through.
The Chair: Your time is up.
Mr Pouliot: Thank you, Madam, and I want to thank my colleagues for their dedicated attention.
Mr Bart Maves (Niagara Falls): My question is just simply this: On page 3, right at the bottom, you've said, "Under the existing regime, there have been clear situations where industrial expansions have triggered significant development charges, even though the expansion created little if any demand for new municipal services." I wonder if you could give me some examples of those situations.
Mr Braithwaite: I'm not sure I can give you exact examples, but I can cite the macro numbers in terms of the survey that was done of a number of the members. I think there were something like 13 or 14 members of CIPREC. We took their actual taxes paid on a per square-foot basis for the last six years, and the compound growth rate was 79% when the inflation rate was 21%, so it's spread into that. We have lots of data specifically. I could dig it up if it's of interest to you.
Mr Maves: Yes, I'd be interested in seeing that.
Mr Hardeman: Thank you very much for your presentation. We've had a number of days of hearings and we've heard considerably from the municipalities and from the builders. One of the concerns that's been expressed through those hearings is that the savings, if the development charges are reduced, will not be passed on to the home buyer. It will be an extra profit for the development industry.
From your point of view, for your organization, you're not into building, you're into selling. Is that right?
Mr Braithwaite: I'm president of a company called Cambridge Shopping Centres that basically builds, owns and manages shopping centres, but many are members of CIPREC. Some of them are residential developers, some of them are office tower developers. They're the full spectrum.
Mr Hardeman: How would you suggest that we deal with the issue of making sure that the dollars are passed on through to the buyers as opposed to becoming an extra profit for the developments?
Mr Braithwaite: I think the best way there is to have a very competitive marketplace.
Mr Hardeman: In your opinion, that will do it?
Mr Braithwaite: I think that's one element that will do it. I think the other thing that is an interesting overview of our industry, given the 79% compound rate, is that in fact a high percentage of our industry in the last five years has gone broke. If there is an opportunity where the market comes back some and there are some government charges backed off that enable shareholders in our industry to make, hopefully, a return, where they won't go bankrupt, I don't think that is all bad either.
Mr Gerretsen: Pardon me if I find there's some inconsistency in your presentation. Basically what you and the development industry are saying is that more of the new development and the costs that go with respect to increasing the requirements of what's already there should be paid for out of the existing tax base because development shouldn't pay for it to the extent that in some municipalities the Development Charges Act allows. You say, for example, that in the city of Toronto the taxes have gone up 79% as a result of that. We're hearing, though, and your own presentation is saying, "Don't let new development pay it but let the existing tax base pay it," for example with respect to transit. If you were to allow that to happen, wouldn't the amount of taxation that's actually raised locally increase at an even more rapid rate than the 79% that it's already done here in Metro Toronto over the last five years, or in the time period 1989-94?
Mr Braithwaite: What's happened in many jurisdictions, unfortunately, there's been a tremendous shift to the commercial side, and you haven't seen anywhere near those kinds of increases on the residential side, for example.
Mr Gerretsen: So that's it. You're really saying that there is an unfair level of taxation being paid for by the commercial and industrial sector as compared to the residential sector. That's your real argument then.
Mr Braithwaite: No, not necessarily. I'm saying that when you look at the facts in regard to the industry segment we're in, it has driven a high percentage of our companies in this country where they're bankrupt. So the current system is not working. The current system is not equitable to our particular section. Where it goes from there or how you balance it, that's part of your job.
Mr Gerretsen: Exactly, and if you allow more of the new development costs, whether they relate specifically to development or outside of that, to be paid for out of the general tax rate, then your 79% that you're talking about may be much higher than that. That's why the law as proposed here may allow for even larger tax increases than the kind that you've talked about, sir.
Mr Braithwaite: It depends how you allocate it. It depends how you balance, how you, as the orchestra leader on this thing --
Mr Gerretsen: Of course, that's one area where we'll hear from the government members, once we've discussed Bill 106, because then I think their attitude and their laughing manner will change quite drastically.
The Chair: Thank you very much.
Mr O'Toole: I think he's missing the point there.
The Chair: Gentlemen, we appreciate your taking the time to come before us this afternoon. Thank you very much.
Mr Maves: Mr Chair, I was just going to ask a question of the parliamentary assistant quickly. Earlier, we had been asked for unanimous consent to ask questions of AMO after they had exhausted their time. We were already 25 minutes behind schedule, with a vote coming, I think, in the House and a 6 o'clock deadline. In deference to the people who had to present, we didn't allow further time for AMO.
I also didn't allow for the consent because I was assuming they had been consulted already by the ministry, and I just wondered if the parliamentary assistant would confirm whether or not that was the case.
Mr Hardeman: Yes, I could confirm that AMO has been consulted with and we've had a considerable number of meetings with AMO dealing with the act.
Mr Maves: Thank you. That makes me feel better.
Mr Hardeman: And I appreciate the fact that they used their full 20 minutes to explain their position on the act, rather than listening to the rhetoric of the opposition.
Mr Gerretsen: That kind of debate, it may very well be, but --
Interjections: We allowed it for you, John.
Mr Gerretsen: Then allow me to respond. Are you going to cut me off too?
You're basically saying AMO has spoken to the government on these issues. That's what you're saying. The opposition, though, has not had the same opportunity to discuss the presentation that AMO made here today, between AMO and the opposition.
The Chair: Thank you. Colleagues, before we adjourn --
Mr Gerretsen: Not for the record. Sure, you can always talk privately.
The Chair: Colleagues, before we adjourn, we should deal with the issue of clause-by-clause amendments being submitted to the clerk's office. The suggestion has been made that the clause-by-clause amendments be submitted by Friday noon.
Mr Hardeman: I think we have unanimous consent, Madam Chair.
Mr Gerretsen: At this point you don't have unanimous consent on that. I'd like to hear what happens on Wednesday, quite frankly, what kind of presentation we're going to have on Wednesday. Is this not a matter that should be discussed by the subcommittee normally?
Mr Hardeman: That's why I talked to the other two members of the subcommittee, to see whether they had any objections to noon.
Mr Gerretsen: That's right.
Mr Hardeman: My understanding was, before this meeting started, that the other two members had agreed.
Mr Gerretsen: And it's quite obvious that these meetings do change things from time to time. So I'm not prepared to agree to unanimous consent at this point in time.
Mr Hardeman: Madam Chair, then I would ask you to call a meeting of the subcommittee at your earliest possible convenience, like in 10 minutes, to see if we can come to an agreement as to when the amendments should be put forward.
The Chair: All right. We'll call a meeting of the subcommittee. I will do that shortly.
Colleagues, we will adjourn and reconvene on Wednesday the 23rd, following standing orders at 3:30.
The committee adjourned at 1759.