Tuesday 25 March 1997
Development Charges Act, 1996, Bill 98, Mr Leach /
Loi de 1996 sur les redevances d'aménagement, projet de loi 98, M. Leach
City of Nepean
Mr Ben Franklin
Mr Lloyd Russell
Ottawa-Carleton Home Builders' Association
Ms Caroline Castrucci
Mr Michael Noonan
Mr Alex Munter
Mr Alex Cullen
Mrs Molly McGoldrick-Larsen
Mr Harry Stein
City of Kanata
Mr Bert Meunier
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Président: Mrs Barbara Fisher (Bruce PC)
Mr DominicAgostino (Hamilton East / -Est L)
Mr John R. Baird (Nepean PC)
Mr DavidChristopherson (Hamilton Centre / -Centre ND)
Mr TedChudleigh (Halton North / -Nord PC)
Ms MarilynChurley (Riverdale ND)
Mr Sean G. Conway (Renfrew N / -Nord L)
Mrs BrendaElliott (Guelph PC)
Mrs BarbaraFisher (Bruce PC)
Mr DougGalt (Northumberland PC)
Mr PatHoy (Essex-Kent L)
Mr BartMaves (Niagara Falls PC)
Mr John R. O'Toole (Durham East / -Est PC)
Mr Jerry J. Ouellette (Oshawa PC)
Mr Joseph N. Tascona (Simcoe Centre PC)
Substitutions present /Membres remplaçants présents:
Mr TonyClement (Brampton South / -Sud PC)
Mr ErnieHardeman (Oxford PC)
Mr BernardGrandmaître (Ottawa East / -Est L)
Mrs MargaretMarland (Mississauga South / -Sud PC)
Mr GillesPouliot (Lake Nipigon / Lac-Nipigon ND)
Mr MarioSergio (Yorkview L)
Clerk / Greffier: Mr Todd Decker
Staff / Personnel: Mr Ray McLellan, research officer, Legislative Research Service
The committee met at 1006 in the Radisson Hotel, Ottawa.
DEVELOPMENT CHARGES ACT, 1996 / LOI DE 1996 SUR LES REDEVANCES D'AMÉNAGEMENT
Consideration of Bill 98, An Act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth / Projet de loi 98, Loi visant à promouvoir la création d'emplois et à accroître la responsabilité des municipalités tout en prévoyant le recouvrement des coûts d'aménagement liés à la croissance.
The Chair (Mrs Brenda Elliott): Good morning, everyone. I'd like to welcome everyone to the second day of the hearings on 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're pleased to be here in Ottawa to hear delegations on the bill.
I would just like to remind everyone and draw your attention to the fact that the minister yesterday brought in proposed draft regulations. These are available at the table by the door and there are some on the table as well.
For any new deputants, the minister also announced yesterday that the government intends to move the following motion to amend Bill 98 during the clause-by-clause review: The portion that requires municipalities to contribute 10% to growth-related costs of water and sewer, roads, hydro, fire and police services would be removed from Bill 98, although the 10% municipal contribution towards transit and waste will await input from these hearings.
CITY OF NEPEAN
The Chair: Our first delegation this morning is from the city of Nepean. Welcome, gentlemen. We're pleased to have you. You have 30 minutes in which to make your presentation. It's always a struggle to find enough time for questions, but that will include your presentation time and questioning from all of the three caucuses equally. Welcome.
Mr Ben Franklin: First, I want to thank you for providing the opportunity to speak to you here in Ottawa-Carleton about our concerns related to a number of the provisions of Bill 98, ie development charges.
In order to understand the position of the city of Nepean, I would like to provide some background information about the city. Nepean is a city of 118,000 people, with a good blend of residential and commercial-industrial development, situated in the western portion of Ottawa-Carleton. The city is home to a number of large employers including Bell-Northern Research, Nortel and others. We have grown in size and have sustained really, I believe, a steady fashion since the 1970s in terms of quality of life while continuing to create employment opportunities for residents of Nepean and Ottawa-Carleton.
Today Nepean is recognized as a leader in many aspects of the municipal field and is in the enviable position today of being debt-free. In addition, we have the lowest city tax rate in Ottawa-Carleton. Notwithstanding these two issues, we are proud to be in the position of providing excellent services and facilities to citizens of Nepean, but many of the facilities are used of course by people right across the region.
How have we achieved this? One of our primary ways was to eliminate any dependence on debt. I must say that one of the members of this committee, Bernie Grandmaître, can recall the days when it was said that Nepean had the highest tax rate and the highest surcharge on the water. We went through a few years of short-term pain for long-term gain. Notwithstanding that, we have today eliminated dependence on debt, thereby eliminating the payment on interest, using those moneys to provide services.
The second way was to adopt the policy that growth would pay for the services that it generated. This policy has been a fundamental element of development in the city since the 1970s. Today our neighbourhoods receive an excellent level of program choices in facilities paid for by their communities through the imposition of development charges. The city has provided little funding for new facilities other than when a facility would also provide extended services to the existing population. Our current development charge bylaw illustrates this concept through the allocation of costs of projects to the existing population for a large number of projects.
People in our city know that they have paid for their services and expect to receive the same level of service as the rest of the city in their new communities. I am concerned that the provisions of the new act will eliminate the ability to obtain these same standards throughout the community.
The city believes that the development industry and the city have a common interest: building affordable, healthy, well-serviced communities. Services go beyond those services that are the most basic in the development of a new house, ie sewer, roads, water etc, and realistically include those quality of life issues such as community buildings, recreation facilities, libraries etc. They are fundamental to communities.
Today, our development charge includes amounts to pay the full cost related to growth in new facilities. Under the new legislation, these services must be cost-shared -- that is, with your proposed legislation -- in an arbitrary fashion based upon no reasoned analysis of need but rather on a standardized formula contained in a provincial act. This approach obviously is in total contrast to the general policy of the city of Nepean. You are now asking me to tell residents that they should subsidize the price of new housing by providing services to new areas that they themselves fully paid for in their own existing communities. I can tell you and you can understand that this is not going to be an easy sell.
What will happen is that new neighbourhoods will not receive the same service that they expect to receive when new facilities are finally developed. They will be substandard; in other words, below standard compared to the other communities.
I find it interesting that this bill in effect provides a direct subsidy to the development industry through property taxation, notwithstanding the fact that the Municipal Act specifically prohibits bonusing of an industry in any manner.
While I believe that all growth-related costs should be paid by new development, I would like to focus on the situation in the city of Nepean related to certain hard services.
As part of new development in the south part of the city -- and that's one of the main growth areas in Ottawa-Carleton -- we are required under provincial environmental standards to store and treat stormwater prior to returning it to the river system. This requirement applies only to the new growth area. The costs of this activity are approximately $30 million to service the new growth. The benefit related to these facilities is 100% growth-related. The storm drains are self-contained in the growth area and do not even flow through the existing system.
Notwithstanding this 100% growth identification, the new act will require existing taxpayers to pay 10% of the costs; $3 million that they will now be required to pay for a service that they don't even use. This cannot be seen, really, as fair.
A similar situation exists in relation to other hard services where the city has identified portions of projects that are to be paid for by growth. As an example, our current development charge work plan identifies road works in the amount of $11.5 million, of which $4 million, or 35%, has been allocated to non-growth; in other words, existing taxpayers. A review of the projects indicates that every road project allocates at least 15% to the existing taxpayer. On top of this, the new act states that the existing taxpayer shall pay 10% of the remaining costs. Again, I cannot understand where the equity exists there.
The city of Nepean was one of the first municipalities in Ontario to pass a bylaw under the original development charge legislation. At that time, extensive information was shared with the industry before adopting a new charge. In early 1996 the city updated its charge. This involved a review of all the growth projects, infrastructure requirements and standards. The review was undertaken on a collaborative basis with the home builders association and the building owners and managers association. The review required that both sides consider each other's positions and provided for a good understanding of growth-related requirements and resultant charge.
I believe both parties listened to each other, as there were changes made, and provided positive input into the ultimate result. The comments that were received from the two groups when the report was tabled with our council are enclosed in this submission and will be left with the clerk. I think you will find the results of the interaction and public meetings with the industry to be positive.
The 1996 review resulted in a new development charge that was reduced by $5,381 per unit outside the south urban drainage area and by $3,860 within the drainage area. These reductions were 55% and 39%, respectively. These reductions were made without the aid of any third-party legislative hammer and were achieved through meaningful dialogue of parties interested in the same goal: building good new communities.
I do not believe the proposed changes will result in better new communities, nor do I think they will achieve any meaningful change in housing prices in Nepean. The prices today after our reductions are very little different from one year ago. I do believe, however, the changes will result in new lower standards of service for everyone or arbitrary tax increases on those who have no involvement in new housing.
The impact on existing taxpayers will be very significant. The additional tax requirement for changes identified in the bill will cost the city $18 million. This would require an immediate increase in property taxes of 7% in order to generate sufficient funds to build the required infrastructure over the next 10 years. I do not have to tell you how acceptable or unacceptable that would be to the public. Alternatively, the city could issue debt and again enter into a sinkhole that debt repayment has created for every level of government in this country. Again, I cannot support that option.
I have often heard the statement that new properties will pay taxes and generate new revenues for the municipality. While on the surface this is true, we all know that you don't make money on new housing, and the cost of servicing the new house actually costs the municipality more than it's bringing in in revenue. So that's not a very accurate statement.
The city currently retains 13% of the total tax bill, most of which is used to fund operating costs. The element that is for capital structures is primarily earmarked for replacement and rehab of the city's infrastructure. On an average tax bill of $390, the amount that currently goes towards new capital items is approximately $5. This will take many years' worth of contributions, obviously, to generate $18 million.
No one will argue that there is a need to make housing as affordable as possible. Transferring the responsibility for financing the structures required to provide that housing is not an acceptable means of achieving affordability. The solutions for housing should not include the subsidization by other taxpayers in their property taxes, a method of taxation that every study has determined to be the most regressive of all types of taxes.
I believe there are opportunities to have the municipal sector and the development industry work together to achieve their common goals without the presence of further legislative impediments. I would urge the government to reconsider this bill and return to a legislative form that allows for consultation and cooperation in establishing the types of communities that both parties can be proud of for years to come.
As a suggestion -- I might throw this one out -- now that there seems to be some clarification and that school taxes are not going to be on property taxes, what you might wish to do is cancel the development fees in the area of education, as it's been very controversial and indeed the rules around it are quite different, as you know, from the rules related to municipal development charges, where you can actually collect money in one community and spend it in another community, even another municipality. That's something you may wish to take a look at if you are going to be looking at changing development fees. There would be a lot of support for that one, I can assure you.
The Chair: Thank you very much. Just for the record, I neglected to introduce you. It's Mr Franklin, the mayor, and Mr Russell, the commissioner of finance.
Mr Franklin: That's correct.
The Chair: We have 16 minutes for questioning and we'll begin with the NDP caucus. You'll have about five minutes.
Mr Gilles Pouliot (Lake Nipigon): Gentlemen, I note as I peruse the agenda that one Molly McGoldrick-Larson, a councillor from the same city of Nepean, is going to -- what can we expect from Molly this afternoon? We won't tell anyone, your worship. Is it the same presentation?
Mr Franklin: This is the official one that was supported by council.
Mr Pouliot: I see.
Mr Franklin: I would be surprised if it's much different, though. I don't believe it would be the minority report.
Mrs Margaret Marland (Mississauga South): You can coach her over lunch.
Mr Franklin: That's an expression I use no matter who's in the current government.
Mr Pouliot: Your Worship, I like minority reports but unfortunately I know what their fate is.
You've talked about development charges and you've mentioned your city, under your guidance, your tutelage, is very proud: no more dependence on debt. With the downloading -- because let's call it what it is. There's nothing that is revenue-neutral here; otherwise it would not be attempted. No elected government would roll the dice that often.
Do you feel that the city of Nepean, when all is said and done, when you no longer have to pay at the residential level for school taxes, but you, sir, will have to provide schools, you will have to bus people back and forth, and the litany, the lament of new services that you're about to acquire borders on the biblical, do you see the city of Nepean in the future being jeopardized by your new role? Because I get the impression with these people here that it will matter little what philosophy the government du jour, of the day has, but it will matter a lot more where you live. So 118,000 people in the proud city of Nepean: What's in store in terms of fiscal responsibility? Are you going to be able to hold the line or are my taxes, when I move to your place, going to go up because of the downloading? How do you see it?
Mr Franklin: We're dealing, then, with a different issue. That's really a question related to --
Mr Pouliot: Oh, we'll get to that, your worship. I've got another two minutes.
Mr Franklin: We're doing an analysis of downloading and we have some concerns, but the 10 area mayors here have a suggestion for restructuring Ottawa-Carleton which will provide substantial savings to help offset the downloading. It's called the greater Ottawa model -- would you like to hear about it?
Mr Grandmaître: We'll give you 30 minutes, Ben.
Mr Franklin: -- whereby regional government is eliminated. Seriously, we realize there are tremendous changes and we also feel there are going to be some amendments; at least that's the indication. Yes, we do have some concerns about some of the changes that are taking place and not knowing the exact numbers. What we are prepared to do is to work with everyone in a logical way so we can maintain property taxes. We're not going to just sit back in a corner and cry and complain. We're going to try to take a leadership role and define solutions.
Mr Pouliot: Mayor Franklin, you're no doubt very much aware of the marketplace, of the price of housing. Is the price of housing market-driven, or will what is being proposed here have a significant change in the price of housing? How will the surrounding services like the fascinating world of sewer and water and road components, all that connects the services we get in a modern municipality, impact somebody coming in -- Mr and Mrs Canada with 1.8 children -- and building a new place, a future? How will they be impacted?
Mr Franklin: I don't believe these changes will actually reduce the price of housing. It will add costs to the local area. Say you select the debt option. Then you can probably accommodate this without any immediate foreseeable change, but it will increase property taxes. I can't see it lowering the actual price of a house. The market is a strong factor. Frankly, the quality of a community is a very important factor in what a house sells for. If you're going to have substandard areas, you're not going to have very desirable areas for people to go. To me it's not going to make that much of a difference. I know the building industry may tell you differently.
Mr Pouliot: They're next.
Mr Franklin: However, I don't think it will have much of an impact. I think the market forces are the main factor.
Mr Pouliot: But someone has to pocket the money. Surely you're not imputing motive and saying that if nobody benefits and there's a vacuum here, their friends -- let's go this far; it's obvious -- will pocket the money? If you take a beating as a municipality and the consumer doesn't get the benefit, who gets it?
The Chair: Excuse me. We're going to move now to a question from the government caucus.
Mr Franklin: I've not read their financial statements and I don't own stocks. Some of them will tell you they're already losing money.
Mr Pouliot: We all have immunity.
Mr Tony Clement (Brampton South): Thank you for being here this morning. A couple of questions. First, some of the figures we have been provided with indicate that Nepean went from development charges of $2,200 in 1985 up to -- I'm presuming it's a peak -- $20,180, which included, I see, an EDC of $1,600 or so, but that number was from 1995. You went from $2,200 to around $20,000 or so per house.
Mr Franklin: That included the region.
Mr Clement: I appreciate that, but the fact of the matter is for a new home buyer in Nepean, $20,000 of that purchase price was in the form -- that's the average, I guess; my colleague reminds me -- of a development charge. That's got to have an impact on growth.
We were talking about growth and jobs in our communities. As one of the deputants said yesterday, a lot of those people buying the new homes are our sons and daughters who are actually from our community, who have grown up in our community and are now moving on to their first house. I know you say it's the developers, but really the developers are just going to be passing along this cost to the new home buyer. Those are our sons and daughters who are paying that $20,000 development charge. Is there any stop to this you can see? Is there any way we can balance the interests of the municipality with the new home buyer who's trying to buy her first house?
Mr Franklin: I think we've done that through meaningful discussion with the development industry. There were no objections to our bylaw. We did lower the cost. But keep in mind that the standards are changing dramatically. I mentioned not only stormwater holding tanks but actual treatment of storm water. We're talking about megaprojects here that have to be picked up. In 1985 they weren't a part of the scenario. More and more, I'm sure, across Ontario requirements will be included for very expensive infrastructure. You look at that one component alone and somebody has to pay for it. Based on our philosophy that growth pays for growth, that's included in the development charge bylaw.
Mr Clement: You've got me on the hard services. In fact the minister announced yesterday he'd like to go to 100% on most of the hard services. On the soft services -- this is the second part of the question -- when you're building a new arena because of the increased growth in your community, let's face it, that arena's open to everybody. Is it not fair to say that 70% of that charge is faced by the new home buyer, but about 30% of that usage is going to be from the existing community and should be borne by the existing community? Is it terribly unfair to say that?
Mr Franklin: It's not unfair to say there should be a split, but that split shouldn't be an arbitrary number. It might be 50-50, depending upon the arena requirements you already have. It might be 75-25. I think what you have to do is have the appropriate split in your development charge bylaw, which we have, based on an analysis of usage of various services, be they libraries, arenas or what have you, worked out with the development industry so they understand our numbers.
Frankly, in this whole exercise of creating development charges I have found the development industry to be very fair, to make positive suggestions. We've tried to change where we felt they were right. I think we've had very positive, healthy dialogue. If you had one arena in a big area, then obviously it's probably going to be 80% used by the existing community. Then you'd have an 80% factor. You can't just do it, I don't believe, arbitrarily. You put numbers in, you do cost breakdowns, and you leave it there for challenge. Let me assure you that if you're wrong, the development industry will point it out to you, because the way it stands, you go to the municipal board and you have to defend your numbers. That's what we're saying. An arbitrary thing is not the right way to go.
Mr Grandmaître: What is Nepean's projected housing growth for the next two or three years?
Mr Franklin: As you know, there's been a decline in the housing area. It is starting to rebound. With a lot of the downsizing, particularly in higher management jobs in the Ottawa-Carleton region, of course the market in larger homes is very soft. You eliminate some executives and the market goes soft. We find it picking up. By the way, our philosophy for the past 25 years has always been to provide communities where there's a full variety of housing types to accommodate all. Indeed, we were very active when the province had the program of becoming involved in requesting our quotas for non-profit housing and so forth. At our new city hall we have development almost across the street which is public housing. But the market basically is not your higher-priced homes. This year it's picking up. We're hoping, for example, for 600 building permits in the area of new housing units, say 612.
Mr Grandmaître: I know it's difficult to project these things. Let's use, as an example, 1995. If you were faced with the same growth in 1997-98, how much money would Nepean lose as far as development charges are concerned?
Mr Franklin: I'm going to ask the finance person to deal with that. It's not always a case of actual outright losing because you'll get it back eventually. The problem is that when you have services in the ground, the services in the ground are from the development charges. When you start a major stormwater treatment facility, you can't put in a quarter of it or half of it; you have to front-end load it. You don't have all your money in from the development charges and yet it's up and running, and you won't have it all in until that area is complete. What we've been doing is front-end loading it from another reserve account or other reserves we may have, and then you lose the interest on that. So there is a cost.
Mr Grandmaître: That's what I'm trying to get at. If you don't get it from the developers, the municipality will have to put up those dollars to provide the services.
Mr Lloyd Russell: If we're looking at 600 housing starts, we calculated the changes in the legislation to be in the neighbourhood of $1,400 to $1,500 per single-family dwelling. On 600 units, you'd be looking at about $900,000 of revenue that was lost.
Mr Franklin: Say $1 million, rounded off.
Mr Grandmaître: I'm not going to ask you if you can afford this, because I know you can afford this; I know your reserve. Talking about reserves, how much money would you have in that bank account for development fees?
Mr Russell: The development charge?
Mr Grandmaître: Yes.
Mr Russell: Just a second; I have it here.
Mr Grandmaître: Approximately; I'm not an auditor.
Mr Russell: At year-end 1996, there was about $500,000 or $600,000 in the development charge reserve fund. We actually project that in our capital budget to be in a negative position throughout four of the five years because there are servicing requirements we have to build in advance of collecting the moneys.
Mr Grandmaître: I have one last question.
The Chair: Your time has expired.
Your worship, Mr Russell, on behalf of the committee, I thank you very much for taking the time to come before us this morning. We appreciate your best advice.
Mrs Marland: Have I got any time to ask a question? Would you ask them if they're prepared to have their books open on the subject of development charges? Perhaps you could ask that question for me, if they'd be willing to have their books open and identify the amounts of money collected and what it was spent on.
Mr Grandmaître: It is public.
Mrs Marland: Yes, but not all municipalities have it.
Mr Grandmaître: The auditor goes through it once a year when there's a municipal audit.
OTTAWA-CARLETON HOME BUILDERS' ASSOCIATION
The Chair: Good morning. You're the representatives from the Ottawa-Carleton Home Builders' Association. Would you please introduce yourselves for Hansard.
Ms Caroline Castrucci: My name is Caroline Castrucci, and I am the immediate past president of the Ottawa-Carleton Home Builders' Association. With me today is Michael Noonan, who is also a member of the board of directors of our association.
The OCHBA is the voice of the residential construction industry in Ottawa-Carleton. Our 300 members collectively are responsible for about 97% of the housing that is annually produced in our region.
Our association appreciates the opportunity it has been provided to address this committee. We are extremely pleased with the many efforts made by the government to date to assist our industry. We have steadfastly stated that we are not looking for handouts but are seeking a balance in terms of the obligations imposed upon our members when it comes time to develop land and construct new homes.
The legislation we are discussing today represents another step down the path of the restoration of an all-regulatory environment which is fair and equal to all participants.
Our association does have some observations and comments which we would like to share with the committee. We understand that the committee is conducting hearings throughout the province and will receive deputations from other local home builders' associations and the Ontario Home Builders' Association. As such, it is not our purpose here today to address, on a clause-by-clause basis, the proposed legislation. Rather we intend to provide the committee a sense of the Ottawa-Carleton housing environment, the impact of the development charges on the local home-building industry and specific comments with respect to aspects of the proposed legislation.
Mr Michael Noonan: The Ottawa-Carleton Home Builders' Association, for the record, supports the direction the government is taking in advancing Bill 98. This piece of legislation is an important reform, impacting an industry which is vital to the economy of the province. The modifications which were announced this morning have altered somewhat some of the comments contained in the paper we have distributed, and we will address them at the appropriate time during the course of our presentation.
We feel that the legislation is vital and well-meaning for three reasons. First of all, the legislation restores accountability to municipalities by requiring specific contributions to infrastructure. I recognize that the balance, the 70% and 90% rule, has been changed, and we'll address that shortly. The legislation also defines very clearly those services which can be included within a development charge. Third, the legislation clarifies the rules of the game with respect to such things as level of service and growth-related expenditures.
However, merely reforming the Development Charges Act is not enough, and we are encouraged by the efforts of the government to undertake a comprehensive review of all legislative elements affecting the construction of new homes and housing. The efforts of the government must stretch to changing the building code, property tax reform and the streamlining of the currently burdensome regulatory environment.
The proposed legislation restores a sense of fairness and balance to the financing of the cost of development. It is not 100% to our liking, but the act does reverse an extremely harmful trend which emerged in the early part of the 1980s and which was accelerated by the enactment of the Development Charges Act.
In Ottawa-Carleton, as has been discussed in the questions of the government, our industry had the unenviable distinction of having to deal with the highest development charges in the province of Ontario. This resulted from previous legislation not providing any definition or guidance as to what was leviable and what was not. Many municipalities established development charges based upon extremely ambitious, expensive and unsustainable capital works programs. Our industry was looked upon by many as the proverbial goose that laid the golden egg, and like the fairy tale we came very close to being slain to get all our eggs.
For example, how many multipurpose sportsplexes does a municipality of 100,000 need? Are community centres justified in every single community and are they financially justifiable? Are extraregional services, those that serve the hinterland, the rural areas or other municipalities, or other provinces for that matter, leviable? What about performing arts theatres, art galleries or equestrian parks? Are they leviable? How could a development charge calculation include a technology which was specifically prohibited by a previous provincial government?
Does a municipality need two city halls? I think these are all important questions, questions which we as an association asked when we were being presented with first-generation development charges. The unfortunate thing we experienced was that our questions were largely ignored and development charges in many cases were enacted.
Development charges at that time were established not based upon what was reasonable and affordable but on what the market could bear and what other municipalities in the region were charging. When the first generation of development charges was established, the housing industry was much stronger than it has been of late. Charges were gradually phased into existence, which was appreciated, but the unfortunate thing was that the full amount of the charge came into force and effect precisely at the time when the housing market was taking a turn for the worse.
In recent years, the housing market in Ottawa-Carleton has suffered considerably. Production volumes are down by over 50% from the time when development charges were first introduced. Housing affordability has increased -- prices have dropped by 15% to 20% -- yet the cost of construction, both hard and soft services, continues to escalate. The toughness of the market is demonstrated quite clearly by the number of long-standing builders in Ottawa-Carleton who have been forced out of business. Over the past two years our region has lost a number of builders, who accounted for roughly 20% of the market's production in 1994. Long-standing companies like MacDonald Homes, Wedgewood Construction and Woodlea Homes have disappeared.
Were development charges exclusively to blame for the conditions in the marketplace? No, but they did exercise a disproportionate influence.
Recognizing market conditions and the cost implications of capital works programs that formed the basis of local development charges, many municipalities, to their credit, have reassessed their charges in advance of the legislation. For example, the city of Nepean has reduced its charge considerably, the city of Gloucester has reduced its charge by 64%, and the city of Ottawa has completely eliminated development charges throughout its jurisdiction. We are of the opinion that changes of this sort clearly demonstrate the inexorable connection between development charges and the performance of the market. However, what these reductions also reveal is the excesses that were built into the development charges when they were first established. We believe that similar trends can be witnessed across the province. We feel the new Development Charges Act will curb many of these abuses.
Before commenting on three particular areas of interest, we would like to make one specific request to the committee. The Development Charges Act must reflect the concerns and the realities of the entire province. The debate that is currently raging in the greater Toronto area with area municipalities is alarming to us in Ottawa-Carleton in that there is always the risk a made-for-Toronto solution will be imposed upon the rest of the province. The committee should appreciate the very real differences between the Toronto housing market and the one in Ottawa-Carleton. In its recommendations to the government, the committee should endeavour to strike a legislative balance applicable to all corners of the province.
We disagree with or depart somewhat from the last deputant. We believe that legislation is needed and some fairly clear rules of the game needed to be defined and we are encouraged by the legislation which is being proposed as well as the regulations which have been distributed this morning.
In the proposed legislation it states that level of service financed by development charges should be limited to a 10-year historical average. This is a marked improvement over the current act, which allows development charges to be based on the highest level of service over the preceding 10 years. However, the wording of the legislation will ring extremely hollow unless there is an extremely clear set of regulations which detail the manner in which the level of service is defined.
We are uncomfortable with such an important element in the legislation being ill-defined and left to the municipalities to implement. The province should strive for a degree of consistency in terms of the methodology employed. The methodology used in Nepean should be identical to the methodology used in Windsor or in Thunder Bay.
For example, the regulations should be clear as to how you measure level of service for the items for which development charges can be imposed, how growth and non-growth contributions are calculated, how intra- and extramunicipal costs are to be apportioned, and how municipalities should deal with instances where capital projects are paid for in part by development charges and in part by property taxes so that new home owners are not paying twice for the same service.
Second, the proposed legislation defines growth-related in terms of benefit provided, but leaves the determination of benefit up to interpretation. Experience has shown that many development charges include services that benefit a much larger area. We would ask that the regulations address in detail and with considerable precision the way in which growth-related should be determined.
Third, the proposed legislation imposes a degree of accountability on local government. The changes which were announced this morning with respect to the 100% on hard services somewhat change our comments, but we still believe it's a vital piece of the legislation that there is a portion attributed to the municipalities.
Many of us know how easy it is to spend someone else's money, and under the current act, particularly where services are presently 100% leviable, this was just the case. Since the consideration of first-generation development charges, we have raised a host of concerns about the breadth of local development charges, claiming that municipal wish lists were gold-plated. We are sure this is a criticism that you've heard previously. The requirement to have a specific municipal contribution we believe will introduce on the part of local officials the need to justify to the elected representatives and to the community at large the need for a particular service. I think it's a self-questioning which previously hasn't existed and which now will emerge.
However, at the same time, the proposed legislation weakens the accountability. From my reading of the legislation, the act proposes that municipalities will be permitted to establish only a 70% and a 90% contribution reserve fund. We do not agree. Instead, we feel that separate reserve funds for each servicing category should be maintained and mandated. This guarantees accounting transparency and permits those contributing to reserve funds an appreciation as to where the funds stand in relationship to one another. Such a system would also allow one to determine whether a development charge is overcollecting in a service area or undercollecting in others, a good test as to the appropriateness of development charges.
The act probably could further enhance accountability by imposing more rigorous auditing functions. Today, development charges are largely based upon a work program, the cost of which has been estimated by municipal staff. Our experience has shown that cost estimates prepared by municipalities for road and sewer works are often substantially higher than what the industry is paying for identical projects. Yet when we question the quantum of cost estimates, all we are told is that that is the price municipalities have to pay. I think it raises real questions as to whether there are excesses that could be eliminated by greater cooperation between the industry and the municipalities. The act should provide for a more streamlined complaint procedure in instances such as these.
Equally, the act is silent on how surpluses in reserve funds attributed to a specific capital cost item are to be handled. For example, if a development charge is based on spending $5 million for a particular work and only $4.2 million gets spent, where does the additional $800,000 go? Should it go back to the people who are paying the development charges, ie, the homeowners?
Finally, we would be remiss if we did not comment on the failure of the legislation to deal with the provision of educational facilities. Our association and the Ontario Home Builders' Association have consistently taken the position that development charges should not be used to fund the provision of schools and related facilities. Rather, the provision of these facilities should be financed from general revenues. The recent decision of the province to remove education from property taxes supports this position. The issue of educational development charges is important and must be addressed over the short term.
Thank you for your interest. We'd be happy to answer any questions the committee may have.
Mr Ernie Hardeman (Oxford): Thank you very much for the presentation. First of all, I think you were both present for the previous presentation from the mayor of Nepean. He brought forward the suggestion or he said that the development charges had been reviewed in Nepean and had actually been lowered in recent months in consultation with the industry, and all parties had agreed that should be done.
First of all, I just wondered if you could help me out as to why that process took place. Why did we decide in the past year to have the discussions and lower development charges in the city of Nepean?
Mr Noonan: I think you can probably point to two or three instances. Number one was the fact that the original development charges in many municipalities in this region were reaching the five years, and notwithstanding the decision in the Development Charges Act to allow for a furthering of the charge, I think there were some decisions made by the city of Nepean and the city of Gloucester that the time was right to review the charge.
Secondly, I think there was a recognition on behalf of the elected representatives in this region that there were some fundamental problems with respect to the industry and that one of the reasons could be attributed to development charges and there was a necessity to look at the cost of development charges as it related to the new housing business. This region has been hurt badly by a number of factors and I think, to their credit, the municipalities recognized that the industry was important to the local economy and there was a necessity to seriously look at it.
Further, there is a good relationship between our association and the municipalities, and the timing was right in so far as we had made some suggestions and the municipalities picked up on our suggestions and decided to move them forward.
Mr Hardeman: Can I go on, then, on that? If the development charges were lowered, was it the opinion of all involved that too many services were included, that services should be built at a lower level and a lower cost, or was the city picking up a percentage of development charges under the new regime?
Mr Noonan: I think there was a really serious look at the capital works budget, looking at it in the context of a fixed time line as opposed to stretching it out to build out. I think there was a reduction in terms of the size of the capital works budget as well as the timing. There were some different financing options brought forward which allowed for the reduction.
Mr Hardeman: So is it reasonable to say, then -- I don't want to put words in your mouth -- that the expectations in the former development charges were set higher than they needed to be?
Mr Noonan: That's our position; that's correct.
Mr Hardeman: Having said that, I just heard from the treasurer that there was not a lot of money in the reserves. What happened to the money that has been supposedly overcharged for a number of years?
Mr Noonan: The money that was in the reserves has been reinvested in the developing communities and put to the purposes which a lot of the money was collected for.
Mrs Marland: Mr Noonan, I think Mayor Franklin said that the development charges had not been appealed by the development industry in the city of Nepean. If the development industry wasn't happy with the charges, would you not have appealed them?
Mr Noonan: We have always said that if we are not satisfied with the quantum of any charge, be it educational, regional or local, we would pursue our rights to the Ontario Municipal Board. In fact, we have appeals outstanding with the Ontario Municipal Board with respect to all educational development charges within the region of Ottawa-Carleton.
Mrs Marland: Were you happy with development charges before the addition of the levy for new school construction?
Mr Noonan: Sorry. Were we happy with --
Mrs Marland: Did Nepean have development charges prior to 1989?
Mr Noonan: On a very small level, yes. I think the numbers which were reflected earlier are quite accurate.
Mrs Marland: For some of the municipalities that have difficulty with them, the straw that broke the camel's back seemed to be adding the cost of new school construction to them. That's why I was asking if you were happy with them prior to the addition of the cost of new schools going on to them.
Mr Noonan: In looking at local development charges separate and distinct from the educational development charges, I think there was a marked move between the charges which existed in the 1980s to the charges which existed following the enactment of the first Development Charges Act. What we saw was a dramatic increase. That caused us some serious concern, that a development charge in some municipalities jumped from $2,000 to $10,000. We felt it was unreasonable, unjustified and unsustainable. However, there was a softening by the phasing policy and the five-year provision. We felt we would see how it was going.
We're our own worst enemies as well, in the sense that at the end of the 1980s the market was still heading up and we said: "It's a cost of doing business. Rather than putting aside our tools, we'll accept them and get on with the business of the day." We didn't like it, but in our own self-interest we decided to move forward. Recessions and slownesses allow you to sit back and think about things. I think it was one of the reasons why throughout much of the 1990s there has been active discussion between the industry and the municipalities as to the size and the breadth of the development charges.
Mr Mario Sergio (Yorkview): Mr Noonan, I know you're speaking for the home building industry, but if you were the mayor of Nepean and you were charged with the responsibility of providing a number of services -- the building industry is there for profit, as running a municipality is to provide services.
The bill as it is now presented does not allow to use development charges for hospitals, schools, parkland acquisition, recreation facilities, police, fire. If you were a municipal politician and you were supposed to provide those facilities, would you like to have the flexibility to use development charges and other fees, building permit fees and realty taxes, to provide those facilities, and should those facilities go hand in hand with new development or should they be provided if and when, according to Bill 98?
Mr Noonan: I'll answer your question as it was posed: if I were the mayor of Nepean. The answer is, quite rightly, that I'd love to take advantage of whatever tools I could in order to gain the necessary revenues to provide the services which my existing residents and future residents would desire me to as an elected representative in the municipality. I think your question was somewhat flawed in so far as saying that the proposed legislation doesn't permit the levying for police and fire; quite clearly it does.
Mr Sergio: It does?
Mr Noonan: It does. In terms of parkland acquisition, the Planning Act is quite clear --
Mr Sergio: Read clause 2(4)3 and see what it says.
Mr Noonan: I'm getting to that. In terms of parkland acquisition, there is a means under the Planning Act to require the conveyance of parkland in the appropriate amount.
In terms of health care, I think there's enough confusion in the health care environment right now not to add to it by the further levying of health care on to the backs of development.
Mr Sergio: Read the clause in the bill. Should those services go before new development, or should they be provided after? Because what this bill does is it says with the exception of roads, sewers and water, nothing else should be provided before.
Mr Noonan: I agree with that. That's right. The development industry and the housing industry is such that I could tell you what demand is today but I could not tell you what demand is in four or five years. There's no sense in providing tremendous overcapacity in the services that are out there in the community, only to have them go dark for a reasonable period of time and also to be unsustainable by the costs on the taxpayers.
Mr Sergio: So fire station, ambulance, police stations -- are you calling those overservices?
Mr Noonan: There is existing capacity in the infrastructure in many municipalities which can accommodate new growth. There certainly is a point where there is a need for additional services. Those are reached once development reaches a certain threshold, and there will be money contributed up to there to allow for the new facilities to be built.
Mr Sergio: Are you saying that some of those services, such as police protection, fire protection and recreation facilities, should be provided four, five, six, 10 years after a new subdivision has been built?
Mr Noonan: Our view is that the services should be provided when there is the appropriate demand in terms of the new communities which are being built there. So for a new community which is starting today which has 20 people in there, there shouldn't be facilities built in advance. They could be served from the existing infrastructure.
You have to understand that growth within Ottawa-Carleton is very gradual in comparison to maybe growth in the GTA. There's a need to recognize that and that services are brought on in a phased manner rather than having them there right from day one. In some master plan communities in Toronto, there's the need immediately for that. If you're looking at a Springdale community, where they're looking at 4,000 acres, yes, you're probably saying there's a need for the infrastructure to be there from day one because there's a fairly good possibility that it's going to be phenomenal growth within the first five years.
Mr Sergio: So shouldn't the mayor of Springdale or Brampton-Bramalea have the flexibility to say, "I want those facilities to be provided now instead of five years down the road"? Isn't that what we are saying?
Mr Noonan: Provided that the list is appropriate and is reasonable. That's all we're asking for.
Mr Sergio: So a fire station, a new police station, a cultural centre, if you will, or a nice park for Springdale should be provided at the same time as you provide the roads, sewers and water, right?
Mr Noonan: I'm saying in certain cases yes, but in other cases no.
Mr Sergio: In other words, it's not totally no or yes.
Mr Pouliot: Mr Noonan, to me you're truly an amazing person.
Mr Noonan: I appreciate that. Thank you.
Mr Pouliot: You carry your heart on your sleeve. You seem to have an opinion on just about any subject matter, whether we're talking about the health levy -- you put yourself in the shoes of municipal councillors. Location, location, location: A location in your kind of infrastructure does not yield a good price.
There's one thing that struck me in your presentation. It was a nuance, and I need your help. Mr Noonan, you mentioned en passant, matter of factly, that when government went to tenders, well, they do their own due diligence and they're great at that, but you seem to hint that it costs more to build for a government, for a municipal or provincial or federal government. Do you think that is so?
Mr Noonan: That's the statement I made, yes.
Mr Pouliot: You see, they go to tenders. They spell out the specs and they receive the tenders from people like yourself. What you're saying is that if you build for the government, the people you represent will charge more since they are building for the government. What assurance do I have, as a consumer, that if you're building me a house you will not pocket the difference? You seem to make a good case when it comes to government building by charging more, but myself as a consumer, I have to turn the page and listen to the same credibility. Is this consistent or is this reasonable?
Mr Noonan: In terms of what we charge and what we don't charge, I think we're in the market every day and we have to deal with the consumers who walk into our sales offices and decide to plunk down their hard-earned money to buy that first house or that second house or that move-down house. We price to the marketplace. The very real realities are that we are in a very competitive industry and a very competitive market. To think that if there is an elimination of the development charges today or -- let's just talk parenthetically. If there's $10,000 eliminated from the development charges today, are we going to drop the prices by $10,000? Are we going to keep the $10,000?
It really depends upon what the market allows us to do. In some cases there will be a sharing; in other cases there will be a total rebate, a total reduction of the price. It's a business. We are responding to what our consumers are saying and what the public is saying to us. In that sense we're no different from you: You are acting on behalf of your constituents; we're acting on behalf of our constituents. Our constituents are in our sales offices every day.
Mr Pouliot: So out of the $10,000, I get the impression -- I must translate everything and it takes time, so please bear with me -- that my chances of getting away with 100% of the savings are remote, because I see two hands here: a hand that gives and one that takes. Is this what you're saying? Go back to the original question. You sure as heck don't pass it along when it's a government entity, and you should, because you get a guarantee of payment, even if it takes a little time. Governments have broad shoulders and they can always pass the cost along to the consumer, so they should drive a bargain. No, they're paying more.
Now I must believe that you will pay -- you've just said in nuance that maybe you will pass on some of the savings. It depends on market conditions, interest rates; it depends on what Greenspan is going to do today and what Thiessen will do two months after. All these things are a factor.
Mr Noonan: You've captured it very nicely. It's a very dynamic environment.
The Chair: Thank you very much. We appreciate your taking the time to come before the committee today.
I would like to mention to those who are here in attendance that yesterday's hearings were very serious. It depends very much on the committee members who are here during the day. I can see that quite clearly.
The Chair: I call Alex Munter. Mr Munter, welcome.
Mr Alex Munter: Welcome to the national capital region. I'm glad to see you're having such a good time here. We like to think that's what happens when people come to Ottawa-Carleton.
I'm here speaking on behalf of myself. My name is Alex Munter. I'm a member of regional council in Ottawa-Carleton and I represent the city of Kanata on regional council. Our council has yet to take a position on this bill. We'll be discussing it in committee next week and at council the following week, but it will be very similar to what you have before you in terms of my presentation.
I share the concern that many municipal politicians across Ontario have expressed about the negative impact of this piece of legislation on municipal finances and the ability of local governments to control our finances. But I also bring the perspective of somebody who grew up in a suburban community and represents a quickly growing suburban community where development charges are an absolutely key part of being able to build the community we have.
I agree and share the view that our goal must be to reduce development charges so that housing is more affordable and commercial-industrial development is encouraged. I think the best way to do that is to have better land use policies, to focus development in areas where significant investment in infrastructure has already taken place and to optimize that investment.
We are moving in that direction here in Ottawa-Carleton. We have a draft regional official plan that has been tabled and that is currently undergoing significant public consultation, and that draft official plan says that new development will take place in those areas where there already is a lot of infrastructure in terms of suburban communities -- places like Kanata in the west, Orleans in the east -- and also, within the greenbelt in Ottawa, in Nepean, Gloucester, Vanier, the communities within the greenbelt.
By not extending the urban boundaries ever outward and starting new communities, we anticipate that for the region alone we're talking about a savings of $2 billion over the life of the plan and there will be other savings for Queen's Park in terms of the funding of education for school boards, if they're still involved, and of course for the lower-tier municipalities, the cities and townships.
That's the way, in terms of controlling our expenditures and restricting our expectations, we will be able to bring down development charges and have a positive effect on the affordability of housing.
People move to Kanata because of its quality of life, because of green space and parks and activities for kids. It has a small-town feel, with city services; in fact the development industry markets that. The development industry doesn't talk about the width of the sewer pipe. They talk about the parks, the green space, the activities and the schools. They talk about the kind of community it is.
I am very concerned that the determination that a whole range of those very essential parts of what constitutes our community will be entirely prohibited from development charges or subject to the 70% limitation for development charges is clearly going to hit those communities hardest that have the greatest need for them; that is, places like Kanata.
I'm concerned that things like community centres and parks and libraries seem to be considered frills in the legislation. They are not frills. They are part of the basic fabric of a community. Publicly owned community space is vital to the health of a community. Indeed, in our community in Kanata one of the issues we struggle with is young people, teenagers, youth, as to what to do with them and for them. One of the concerns is that they have nowhere to go except for privately owned spaces like malls, where they're not welcome. The division between hard and soft services is a phoney division and one that should be deleted from the bill.
Requiring that funds for new development be borne partly or entirely by existing taxpayers at the same time that you will be putting considerable pressure on the existing taxpayers by downloading so many provincial services to the local property tax base means a choice of higher property taxes, less or no services, or privately run facilities that are not open to all. A fourth option would be borrowing; that would be another option that would be open to municipalities. I think you can see why none of those particular options would be appetizing for members of local councils.
The legislation ignores the recommendations of the Crombie panel and diminishes the ability of local councils to decide for themselves the kind of community they want to build, and it runs directly counter to what this government has said its intention is, which is to give municipalities and local councils the ability and the tools to be able to finance their operations and to be able to build the kind of community they want to.
It is also, incidentally, unfair to residents in existing areas who did bear the entire cost of new infrastructure in their own neighbourhood, or almost all of it, to then have to pay again for newer neighbours down the street.
I would urge the committee to amend the bill so that it is not so rigidly inflexible in limiting municipalities' ability to run their own affairs.
A couple of specific points: I believe there should not be a mandatory copayment of property tax dollars to access development charge revenue. I also believe the bill should be permissive in terms of allowing area-specific development charges in different areas, depending on those different areas' different needs.
I'd also like to take a moment to talk about the health care piece of the legislation because that is of grave concern. We had our visit from the Health Services Restructuring Commission in this community about a month ago. As with everywhere else, they have closed hospital beds and closed facilities, but they've also given an indication that there will be a significant bill for the local community to pay to refit and restructure the health care system in terms of capital one-time costs. On the hospital side, the total capital bill is $106 million, of which a third, a little over $30 million, will have to be raised locally.
In addition to that, there will be new facilities. One of the areas in which Ottawa-Carleton lags way behind the rest of the province is long-term care. We have a big catch-up game, and the commission recognized that. We will have hundreds and hundreds -- well, thousands; I guess that's what hundreds and hundreds add up to -- of new long-term-care beds. The problem with long-term-care beds in this community and in many communities has not been the operating dollars. That's half the problem. Once you get the operating dollars, you need the capital money to kickstart the whole venture. You need to be able to build the building.
I'll give you an example. Villa Marconi got its allocation for long-term-care beds in this community in 1987. They open this year. It took them 10 years to put together the capital dollars. An absolutely indispensable part of that capital piece was regional development charges, a regional fund that went into the construction of that facility.
If we're going to build a whole lot of new nursing homes and a whole lot of new community health facilities, if we're going to have to refit hospitals and if we're going to accommodate the growth of aging population as a result of all the other changes that are going on, cutting health care facilities out of the Development Charges Act will sabotage the entire effort to refit and restructure the health care system in our community.
I share the view of the Association of Municipalities of Ontario that this bill will "curtail council's ability to finance infrastructure services and hold the line on property tax increases," and I would respectfully ask your committee to change the bill. I'm happy to answer any questions.
Mr Grandmaître: Thanks for your presentation, Alex. I was interested in your comment that with better land use, the regional government could save possibly up to $2 billion. Do you think it was an error 27 years ago to create the city of Kanata?
Mr Munter: Absolutely not. In fact, the city of Kanata was created in 1978. The difference, of course --
Mr Grandmaître: In 1978, I should say.
Mr Munter: The difference was that it was a different time, a different time in terms of budgets. What we have done over the past 27 years is that we have made a very significant investment, we in Kanata but also folks all across this region, a very significant initial investment in infrastructure, in terms of regional government $100 million alone in the past nine years. What the regional official plan proposes to do is to finish the job.
That initial investment, the skeleton of services, will allow for growth of up to 100,000 people; Kanata now has 50,000. What the regional official plan does is say, "Let's focus development in Kanata and in Orleans and in those communities where we've already begun to make that investment," instead of going to places like Leitrim, for example, where there are no services in the ground and start brand-new communities there. By doing that, by focusing on those suburban and urban communities where that investment in services has already been made, that's a saving for regional government alone of $2 billion.
Mr Grandmaître: But what I'm trying to get at -- we're talking about better land use, and when Ottawa-Carleton was created Kanata wasn't in place. When you talk about Kanata and you talk about Orleans, you're talking about east-west. OC Transpo is saying, "That's where all our cost has gone in the last 15 or 20 years," to provide better transportation and so on and so forth. And don't forget, in those days, back in 1973, the projected population was a million people for Ottawa-Carleton. We haven't reached this.
I want to go back to my original question. Do you think that we should have been better land users back in 1978 and said, "Let's not go to Orleans or create Kanata; let's build the inner core"? You've had great success in Kanata. I'm not challenging your successes, but I'm just wondering if it was the right move to create another city.
Mr Munter: Ben, I wasn't around in the 1960s when all those expansion decisions were made. You were, and I presume you were part of those debates. We should get together --
Mr Grandmaître: Do you want to strike this out?
Mr Munter: -- and talk about that discussion. I grew up in Kanata, Kanata is my home town, and I have a tremendous emotional investment in Kanata. But there's also, on the fiscal side, a tremendous financial investment that's been made. I think we need to build on that financial investment and focus development there and in those other places where that investment has already been made.
Mr Grandmaître: One last question, Alex: What is the difference between growth-related costs in Kanata versus growth-related costs in Nepean? What are the differences?
Mr Munter: It depends where. I don't have the figures off the top of my head, but there's a per-door cost from the regional perspective that -- now I'm going from memory, so I won't vouch for these numbers, but it's in the neighbourhood of $10,000 or $11,000 a door for regional government and it's a couple of thousand dollars more per door for the Nepean south urban community.
Mr Grandmaître: Why?
Mr Munter: It's a function of what's there already. In Kanata's case a lot of the regional roads, a lot of the sewers, a lot of the services are already there; for the south urban community in Nepean they're not, or some of those services are not.
Mr Sergio: One of the previous speakers said that we should have blanket legislation for all the municipalities in Ontario. Do you believe that would serve municipalities better, or should municipalities have the flexibility to conduct their own affairs?
Mr Munter: Not only should we not have blanket legislation across Ontario, we should not have blanket legislation within a municipality. I think one of the things that kind of refers to the previous question, one of the realities is that different areas have different costs to develop. Even within Kanata, an area that's right on the transit way and that is serviced by sewer, that is serviced by regional roads, is much, much more cost-effective than at the very perimeter of Kanata land that has just been designated from rural to urban, where sewers will have to be built and roads will have to be built. In that particular case I believe there should be a differential development charge so that we can pass on the benefit to the homeowner who moves into that community where it is more cost-effective for the public purse to put the infrastructure in place for that development, and this piece of legislation does not permit us to do that.
Mr Sergio: If you receive an application at the local level from a developer saying, "I want to build on this particular piece of land, but I don't have enough land to provide you with the 5% park levy, but I'm willing to pay you so you can go and buy land somewhere else to provide parkland facilities for the community," do you think they should have that flexibility to say: "Okay. I'll take your money, development charges, because you don't have enough land. It's downtown. It's at the four corners. Therefore, we can't ask for two acres of land. The land just isn't there"? Do you think it's fair that the municipality charges development charges to provide a facility such as a park in the vicinity to go in and buy land?
Mr Munter: In our region it's not regional government that does that, but I'm aware that cities do, and I believe the cities should have the flexibility to be able to do that.
Mr John O'Toole (Durham East): Thank you very much, Alex. I gather there's another Alex from the Ottawa-Carleton region.
Mr Munter: My other brother Alex.
Mr O'Toole: Yes. It's good to see a young person so heavily involved in both the municipal level of politics and the broader view and coming forward. That being said, after listening for a day or so and reading through this material, it's really all about the level of service that the taxpayer can afford.
You've really taken some issue with the distinction between hard service and soft service. It could be argued that hard services -- I'm running this by you here; you seem to be very well informed -- that there needs to be addressment of retention ponds and those other kinds of things that are relatively new in the planning process, but when it comes to soft services, to look ahead, five, 10, perhaps even 20 years in the planning window, it may be rather risky to assume certain service levels.
I'm asking you, first, do you believe that the enjoyment of our communities in some ways should reflect the state of the economy? The economy can be very high and very aggressive and that can vary across the province. We may have a lot of tennis courts, squash courts and floodlit T-ball stadiums, depending on how rich we are, and it may get very pathetic in some areas when the federal government downsizes by 30,000 employees. It may have a fair impact on Kanata. Once you put these in place, do you think that the level of soft services is a variable?
Mr Munter: Yes, and I think that the current system takes account of that.
Mr O'Toole: I don't agree with you.
Mr Munter: My experience of setting development charges, both at the city and at the region, is that it's a tortuous process. Every penny is defended and at the end of the day, anybody -- any citizen, any developer, anybody -- can go to the municipal board and make the case that they made a mistake.
Mr O'Toole: I just want to put one thing to you. The greatest burden for soft services is not the capital. A fund-raiser will get that out of the way. It's the operational, which is huge and progressively increasing every year because of various collective agreements and what have you, and the replacement of small nets and various things. Pools never make money and in fact they're a huge insurance liability.
Are we not saddling the future, with these soft service decisions, with inordinately expensive, and I'm not sure sustainable, cost? I've been through it. I was a local regional councillor, all that stuff, right from the beginning.
Mr Munter: I guess I would argue, first of all, with the premise that we have Cadillac services.
Mr O'Toole: That's right. We do.
Mr Munter: Well, you may; we don't. Certainly in the newer communities in Kanata there is a lot of concern about the complete absence of some services. But I've always been a bit surprised by the development industry's approach to this because if there were no parks and there were no schools and there were no community centres and there were no green spaces, and there were none of these soft services that seem so expendable, they wouldn't be able to sell their homes --
Mr O'Toole: And they would build them like they used to. That's what they used to do, if you've been in municipal politics for a long time.
Mr Hardeman: Thank you very much, Councillor, for your presentation. I just quickly want to go to a couple of areas. One was the development charges for hospitals and the exclusion of hospitals. First of all, I want to point out that's it's only the hospital as defined by the hospital act that is eliminated, not the long-term-care facilities that municipalities are presently somewhat responsible for.
But in your presentation you speak of the Hospital Services Restructuring Commission coming into Ottawa-Carleton and making some recommendations that require expending considerable sums of money to change hospital care in the region. Do you think it's appropriate that new homeowners should pay for that as opposed to the general tax base? Obviously, the new homeowner didn't create the need for the change in health care. They only created the need for more health care. The majority of the recommendations are based on changing facilities, not expanding facilities.
Mr Munter: It would depend on what it was. The development charges bylaw goes through a process where any project that's in it needs to be justified on exactly that basis. For example, the transfer of some services from one hospital in the central part of our region out to the western part of our region, the community hospital, which is being proposed is obstetrics and gynaecology and that is reflecting the growth of a young community. If the growth of that community is creating the demand for that service, then that would be appropriate.
I am just concerned that we are boxing ourselves into a corner in terms of the magnitude of what we will need to come up with locally. Fund-raising will accomplish part of that, but if we cut off the ability to use regional development charges for those health care services, we are really boxing ourselves in.
The Chair: Thank you. I must interject at this point.
Mr Hardeman: That's it?
The Chair: Sorry.
Mr Munter, I appreciate your taking the time. On behalf of the committee, we thank you for bringing your views to us this morning.
The Chair: I'd like to welcome, please, Mr Cullen from the regional municipality of Ottawa-Carleton.
Mr Alex Cullen: Thank you, Madam Chair. I am the other Alex and there is a fair amount of -- I shouldn't say "confusion," but from time to time -- our offices are opposite each other and we do sometimes find ourselves in the position of taking each other's phone calls, which in politics can be very amusing, as I'm sure you can imagine.
Good morning to you all. As has been mentioned, my name is Alex Cullen, I am a member of regional council here in Ottawa-Carleton and a member of its planning and environment committee and have been a member for the past five years. I am speaking here on my own behalf concerning the proposals contained in Bill 98.
Bill 98 deals with an important tool, development charges, that affects not only housing costs and municipal services, plus the taxes needed to support them, but clearly also land use. Therefore, I thought it would be useful, before reviewing the proposed legislation on how the legislation affects land use, to recall the principles regarding land use that this government has enunciated.
On May 22, 1996, the Lieutenant Governor in Council issued, under the authority of the Planning Act, a provincial policy statement governing land use planning. This is the policy statement here. Specifically, under section 2, "Principles," the government stated:
"Ontario's long-term economic prosperity, environmental health and social wellbeing depend on:
"1. Managing change and promoting efficient, cost-effective development and land use patterns which stimulate economic growth and protect the environment and public health."
Further on in the policy statement, under "Policies," the government stated:
"It is the policy of the province of Ontario that:
"1.1.1 ...cost-effective development patterns will be promoted.
"1.1.2 Land requirements and land use patterns will be based on:...
"b. densities which (1) efficiently use land, resources, infrastructure and public service facilities; (2) avoid the need for unnecessary and/or uneconomical expansion of infrastructure; (3) support the use of public transit in areas where it exists or is to be developed;"
"d. development standards which are cost-effective and which will minimize land consumption and reduce servicing costs; and
"e. providing opportunities for redevelopment, intensification and revitalization in areas that have sufficient existing or planned infrastructure."
It is a short step in logic and in economic theory -- and I should mention in parentheses that I am a professional economist -- to the position that the Legislature ought to adopt that development charges should be fully cost-recoverable for the services to be provided to new residential communities. These services include roads, transit, water, sewers, sidewalks, lighting, police, fire protection, schools, parks, hospitals, community centres, libraries and recreational facilities. These are what we consider today to be the basic building blocks of any healthy community.
If we are to have efficient, cost-effective land use, then we cannot allow public subsidies to cloud or undermine efficiency. With full infrastructure pricing, the market will be able to match consumer demand with housing supply, including the community services associated with that housing -- because, as has been mentioned earlier, you do not buy a house strictly in isolation -- at a price that will clear the market. It is through both competition and price that innovation occurs. While the housing industry may seek public subsidies to lower costs and therefore sell more products, one has to ask: Products of what?
We can no longer afford urban sprawl. Municipalities have already lost significant provincial subsidies that previously helped reduce the costs of development. In 1992, when the region's development charge bylaw was first passed, the regional municipality of Ottawa-Carleton received some $76.5 million in provincial subsidies for programs not related to health, social services or child care. In other words, these were the moneys we received from the province that we could spend on transportation, public transit, water and sewers. By 1997 that amount had been reduced to $44.3 million, basically the municipal support program and public transit operating subsidy, and by 1998 this will be reduced to $0.
It is worth noting that the Crombie Who Does What commission, which recommended to the government that the public transit subsidy to municipalities be eliminated, stated that the subsidy was distorting municipal planning decisions, leading to low-density, transit-inefficient development. The government has accepted this argument. How can it now say that municipalities must subsidize land use costs for developers? If it is consistent with both its land use policy statement and the recommendation it has accepted from the Who Does What commission, it must support the ability of municipalities to set full-cost recovery development charges.
Bill 98 speaks of increased municipal accountability. If this is to be so, then why is the provincial government legislating a municipal subsidy of local property tax dollars to reduce developer costs? The government's own Common Sense Revolution, of which I have a copy not yet autographed, speaks of cutting subsidies to business by some $200 million. Then why force municipalities to subsidize business? It is our community's property tax dollars. If our taxpayers want to subsidize business for whatever reason, then the decision belongs to their locally elected representatives, who are accountable to them for their tax dollars. Forcing a municipality to contribute to the costs of new development by provincial legislation reduces accountability, not improves it.
The Ontario Legislature should also recognize that municipalities should have the ability to set differential development charges by area to reflect differences in the costs of providing community services to the new development. To require, as some have suggested, a one-size-fits-all approach in setting development charges across a municipality ignores the realities of providing service to that area, masks the true cost of land use, provides cross-subsidization from less costly, more efficient land use to more costly, less efficient areas, and creates a disincentive to make better use of existing infrastructure and revitalize existing neighbourhoods, contrary to the very principles enunciated in the government's own land use policy statement.
Let me give you an example: The regional municipality of Ottawa-Carleton has been reviewing its official plan and as part of this review has developed a regional development strategy to govern the direction of growth for the region for the next 25 years. We anticipate growing from a population of about 678,000 in 1991 to just over 1 million in 2021, requiring some 137,000 new dwelling units by that year. Our official plan designates the major urban area within the national capital greenbelt, which has about 476,000 people, and five urban areas outside the greenbelt, which now have a population of just over 200,000, to accommodate this growth.
We have sought the most efficient land use path possible, recognizing both consumer demand and infrastructure constraints, mixing both residential intensification and new development, to reduce the projected capital cost of growth from our previous official plan, from over $500 million a year to about $120 million a year. My colleague who spoke to you earlier spoke about a $2 billion reduction in those costs over the lifetime of the plan, and that's what it works out to.
Even to achieve this, according to our own staff analysis, based on, by the way, pre-mega-week announcements, mill rate increases would still be required for most of the period to finance roads and public transit; water rate and sewer surcharge increases would also be needed.
However, within the region costs per additional dwelling unit do vary by area, and I've included in my presentation a table that shows the urban growth areas, both inside and outside the greenbelt, and the cost per dwelling unit, or per door, if you like, for water and waste water and for road and transit way costs. You can see that it ranges from about $7,500 per door inside the greenbelt, which is already developed, going out to about from $13,500 all the way out to $18,500 in the suburban growth areas.
The table clearly shows that dwelling costs are lower inside the greenbelt, where infrastructure already exists, and higher outside the greenbelt, where new infrastructure would have to be created. It should be also noted that were we to shift 40,000 more units from inside the greenbelt to the urban areas outside the greenbelt, it would cost us, the regional government, $400 million more in capital costs.
By allowing development charges to vary by area, reflecting the true costs of development, more efficient land use would be encouraged, existing infrastructure better used and existing neighbourhoods revitalized, meeting those very principles that were outlined in the government's land use policy statement. The proposed legislation in Bill 98 should permit municipalities to set such differential development charges, assuming that the cost differences can be properly documented.
If it is the provincial government's wish to stimulate the housing industry, then it has its own tax dollars to do that. However, existing property taxpayers should not be forced to subsidize the costs of new development. Forcing a subsidy not only contradicts the notion of accountability, but masks land use costs, leading to less than rational or efficient land use decisions. Further, efficient land use should be promoted through differential development charges.
That concludes my presentation. I would be happy to answer any questions the committee may have.
Mr Pouliot: Good morning, Mr Cullen. You're an economist.
Mr Cullen: There's this old saying: "If you get two economists, three opinions, and there are three kinds of economists, those who can count and those who can't."
Mr Pouliot: So I should go outside and flip a coin, and give my question to the government of the day.
You have brought with you, and I find it quite insightful, a copy of the manifesto that you waved, the mantra.
Mr Cullen: The provincial policy statement?
Mr Pouliot: No, no, the other one, the one that's not autographed.
Mr Doug Galt (Northumberland): We'll have to autograph it for you.
Mr Cullen: I don't think it would have resale value.
Mr Pouliot: Madam Chair, your good office will restore order, please.
You will see that the manifesto pledges 725,000 jobs. It makes mention of reconciling the deficit, to eliminate it in the first mandate, starting with $11 billion, downscaling to nothing. It also pledges, in four different instalments, a 30% reduction on the PIT, the provincial income tax. The federal government has deemed it necessary to reduce the transfer payments by approximately $3 billion. Given the time compression -- I mean, there's no secret here. The 30% is $5.4 billion. You have an $11-billion deficit going down to nothing in a very short, compressed timetable. The feds are downloading.
I want to wish you well; I'm on your side. These people shoot to kill. The answer is quite simple: Somebody has to carry the guilt, somebody has to pay, and your number came up, Mr Cullen. If I were your lawyer, I might be able to reduce the voltage, but that's about it; you're gone. Tout fini. When I see this, I see they're gutting the Ministry of Environment; MNR is a virtue of yesteryear.
I go back to, where you live you have the capacity to impose levies: commercial, residential and industrial. But this is finite, this is limited. Do you know what's happening here? The government says, "You'll have less rules and regulation, but you take care of it," so the standards might differ greatly, given a shortage of cash and partnership. It's not unlike -- and I want your answer to this -- telling your son and/or daughter: "Here's $10. Buy yourself a popcorn. Go to the cinema and buy yourself a cola, a soda." They take office and they say: "Here's $5. You can do what you wish with it." You say, "But Dad, I've only got $5."
Where do you see the future? Where do you see your chances of success? Because this is yet one example of the downloading. Those people, namely Mr O'Toole, with respect, has hinted in his presentation before that if he could get the darned unions -- he didn't say that, but he said the collective agreement -- if he could get people to work 60 hours a week at a buck an hour, that's his quality of life; that's his and their sense of family unit and family value. Save me.
Mr Cullen: In responding to this -- and I know there's lots of licence here -- I have to tell members of the committee that my residents value services and they're willing to pay for services. I go out in my community all the time. These are property taxpayers. They do not want to see services reduced. There's some kind of mantra that says there's too much government, and in terms of regulation maybe there's an argument, but not in the provision of services. They don't like it when their parks aren't being kept; they don't like it when their public libraries are being cut back in hours; they don't like it when their streets aren't being plowed enough or swept enough; they don't like it when there are not enough police around; they don't like it when we are not able to build enough fire stations to serve them. They don't like it. They have a standard of service that they expect us to maintain and it's very, very difficult.
Coming back to the legislation here, we are asking for the ability to provide the level of service that communities expect. It's not enough to build a house on a lot and say: "There it is. That's your community." A community implies not only the roads to get there, and the water and waste water, but also the amenities that go with it. You cannot simply build houses and then walk away and think that's enough.
You talk to your colleague from Nepean who has been lobbying for a long time, as a lot of MPPs from Nepean have been, looking for a high school for his community. That's been out there for years. The mayor of Nepean was here. He can tell you how long he's been looking for that. I have to say to you that if it can't be done directly through this government or any other government providing the capital dollars, which it has in hand -- because I'm a former school board trustee and I am aware of what the Minister of Education holds back in terms of capital dollars -- then allow us to provide that through setting the appropriate development charges to provide that service. Our taxpayers -- it's all the same taxpayer -- are not willing to pay the freight for someone else's community. It has to come back to that community. From an economist's perspective, you set that price, you get efficient use of that. If I tell you that -- I won't get into an economic discussion here, but I'd love to. I hope that's a start.
Mr Hardeman: Thank you, Mr Cullen, for your presentation. There's one thing I wanted to correct from the previous questioner. The Common Sense Revolution did not suggest we would go from an $11-billion deficit to a balanced budget. The previous government said there was only going to be an $8-billion deficit. I guess they somewhat stretched the truth prior to the election.
I wanted to go to your suggestion that the development charges should be allowed to be, shall we say, area-rated for different areas. We had a presentation yesterday that was very critical of development charges based on charging for it one thing and then not spending it and moving it somewhere else. Would you see a problem with that in area rating, that once you have charged the development charges and circumstances changed and you did not build that infrastructure, you would need to move the money elsewhere and you couldn't because you had collected it for that purpose?
Mr Cullen: If you've charged for the cost of a service -- which presumably you have documented, because any area-specific development charge can be challenged before the OMB -- and you have found some different means of technology of providing that service, then it seems to me it's appropriate that the moneys collected should be returned in some fashion. It's a simple question of justice there. For example, if we found a cheaper way of providing services to Leitrim, which is ranked here at $18,500 a door, then obviously that charge comes down, and had we collected to that point to provide that service, there has to be some means of restoring that. It is only consistent and makes sense.
Mr Hardeman: This gentleman came forward and suggested that in three successive development charges there had been a bridge that was going to be built for some millions of dollars. In the last, most recent study, the bridge disappeared, it had never been built, but sufficient dollars had been collected to build it and the money was now going somewhere else in the municipality, for other services. Do you believe the development charge needs to cover that off so municipalities can't do that, or do you not see that as a problem in your municipality?
Mr Cullen: My understanding of the development charges bylaw that we have is that the projects we charge for have to be in our official plan, have to be in our 10-year capital forecast or whatever capital forecast and have to be documented. I don't see the opportunity really coming up that we're going to play a shell game -- a dangerous phrase, I know -- with these moneys. If we have it in our capital plan and something else changes, then there's a case to be made to adjust the figures accordingly. But we have never viewed it.
We work closely with the development industry, and the provision of these services particularly, since we're responsible for most of the hard services -- the arterial roads, water, waste water, the major trunks -- you won't see these things being shuffled around and these kinds of games being played. I think really the nature of the act regulates that by the demand for detail, that you must have a justifiable project in order to be able to charge for it. You can't make things appear and disappear.
Mr Tony Clement (Brampton South): I just wanted to return to the theme of accountability, because that is a thread that is woven throughout the fabric of this bill. You and I perhaps might have to disagree on where the accountability should lie. I agree that accountability is of foremost concern, but my concern is that by allowing the municipalities unrestricted freedom to impose development charges on whatever they deem appropriate, you lose the accountability. I want you to respond to that. We were discussing yesterday -- and it was before Mr Pouliot was here, so it wasn't through any melodrama on his part. Yesterday, the terminology was that these development charges can become the crack cocaine of municipal finance, precisely because the municipalities get hooked on them --
Mr Sergio: That's VLTs.
Mr Clement: I guess it's becoming a term of art.
Mr Cullen: The legislation is very clear, and your statement "unrestricted access to this" belies the facts. We have to document, we have to prove before we can ever charge anything. Whatever we say is appealable to the Ontario Municipal Board and the Ontario Municipal Board is not very conducive to imaginary projects or highfalutin standards, or whatever. Every nickel and dime that we charge for, we know we have public scrutiny, we have to have a public hearing. It's all documented. The development community comes out and challenges us -- in fact, it's in our interest to sit down and work out the cost of these details -- and it's subject to a third-party review. We are very accountable, extremely accountable. Third-party review -- I don't think you can even say that here.
Mr Clement: I congratulate your community for being that way. Unfortunately we have to deal with all communities in Ontario. We heard a presentation yesterday from an economist, Garry Stamm, who gave us a very detailed presentation about how development charges were levied in another community, Oakville, and none of the development charges that were raised were actually spent on the projects that they had documented, which concerns me greatly.
Mr Cullen: There is a process of review and there is recourse, because quite frankly --
Mr Clement: Well, something's wrong somewhere, because they've raised all this money for a decade and it didn't get spent on what they promised it to be spent on.
Mr Cullen: But it still does not justify requiring a copayment by a municipality. You're telling our taxpayers where their money should go, when they should have choice over it. That's the issue.
Mr Clement: What about the taxpayers in the new homes? Who's looking out for them?
Mr Cullen: If they choose to buy that package, it's their choice.
Mr Clement: They don't even know what's in the development charge. They have no idea what they're paying.
Mr Cullen: They should and they can. It's public information.
The Chair: We'll move to the Liberal caucus, please.
Mr Grandmaître: I want to follow up on this. I'm going to say something, Mr Parliamentary Assistant, and please correct me if I'm wrong.
Mr Galt: Oh, he will.
Mr Hardeman: I find that very difficult to do, Ben.
Mr Grandmaître: Every municipality comes up with a development charge bylaw and it has to be approved by the Ministry of Municipal Affairs.
Mr Cullen: It does ultimately go through the Minister of Municipal Affairs.
Mr Grandmaître: My question.
Mr Cullen: It does. It's submitted for approval.
Mr Grandmaître: It's submitted, right? If it is --
Mr Hardeman: I stand to be corrected, but I don't believe the minister approves the bylaws.
Mr Grandmaître: On development charges?
Mr Hardeman: No, I don't believe so. They do at the present time, because any municipality that wishes to --
Mr Grandmaître: This is what I'm talking about.
Mr Hardeman: No. At the present time, any municipality, after Bill 20, that wanted to raise its development charges required the minister's approval to do that because the freeze was put in on all development charge bylaws. But under the old Development Charges Act, the present act, it does not require the minister's approval for the bylaws, but all bylaws are appealable to the Ontario Municipal Board. When the municipality passes it, a developer or anyone else may appeal it to the Ontario Municipal Board.
Mr Grandmaître: Okay. A follow-up question on that: If this bylaw is approved, then a special account --
Mr Cullen: That's right.
Mr Grandmaître: Let's say it's a reserve fund for development charges to provide services for that area, a subdivision or whatever. If this is the case, your municipal books are audited every year by an auditor, and if those dollars are being used to provide other services, then the municipal auditor is not doing his or her job, because you're not supposed to use those dollars to do something else.
Having said this, I'll go on to my second question. Do you think, Alex, that this bill --
Mr Clement: We'll discuss it over lunch.
Mr Grandmaître: No, it's not. Do you think this bill is about affordability? Do you really think so?
Mr Cullen: Affordability for whom? If I wanted to make it very affordable for the housing industry to sell their products, then I would be looking for ways and means to reduce their prices. One way of doing it, which apparently is here, is to provide a public subsidy from the property taxpayer, and I don't think that's the right kind of affordability.
What are the largest costs in terms of construction? Land. If you have cheap, unserviced land and the cost of providing the services out there are borne by other taxpayers, that's a wonderful deal. Our taxpayers, who then pay the freight downstream, not only pay in terms of the additional property taxes to pay for that development, but then pay as part of the ongoing pool on the ongoing maintenance of those services, the replacement of the pipe, the provision of public transit, whatever.
How we can get more affordable and more efficient land use is to make the market respond to market pricing. You will get innovation. You will get townhouses. We didn't have townhouses many years ago. We have them today because it makes sense; it's cheaper and it's more effective land use. We end up providing public services better because more people can take that bus because there are more people there at the bus stop to pick up. That's better for us. It means that we can provide better service. But the kind of urban sprawl that we've had to date, low-density urban sprawl that's transit-inefficient, that Crombie criticized and said: "Take away that subsidy because you're only allowing municipalities to promote transit-inefficient land use" -- the subsidy masks rational, efficient land use decisions.
Mr Grandmaître: Do you think the government is breaking its own Municipal Act when it's subsidizing developers?
Mr Cullen: In a sense it is bonusing. It is providing an incentive to the industry at the cost of local taxpayers, and it's not necessary.
Mr Sergio: Alex, just one quick question: Yesterday the minister, in the introduction of the bill, said that new development charges should pay solely for new development, nothing else. Let me give you an example that we're going through in my area now, Jane and Wilson. Costco, I think, is coming in and has an application for rezoning on a large piece of land. Development charges could be maybe $1 million, and he says, "I want it at any cost."
He's willing to pay for any improvement to the infrastructure. Not the local municipality but the regional municipality of Metropolitan Toronto, says: "We have control of the main arterial roads. You can't dump on our street all the traffic from your new development unless you do certain things. You've got to provide a new right-hand lane; you've got to widen the street; you have to build a bridge over Black Creek; you have to widen the road going into the new development; you have to put up a new set of streetlights, which add another $1 million."
He says, "We are willing to pay."
Who should be paying for that, the new development entirely or should the municipality cover some of those costs, such as road improvements, a new bridge, traffic intersection lights, stuff like that? Who should be paying for it?
Mr Cullen: Each development is a business decision by the developer. We have constant negotiations with developers about a project coming in, its traffic impacts, and what contributions they will make to services, and I would say over 90% of the time we are successful in concluding these negotiations. They are able to mention what kind of development charges they are contributing and we are able to satisfactorily provide the additional services, whether it is a new signalized intersection or the construction of an additional lane or whatever.
What is important is that this new development requires services and if we are going to be consistent, and we are consistent, we say the developer pays, and the developer does pay. The developer is willing to pay because it's part of the business decision. What the developer really asks for is certainty in terms of understanding the costs. We provide that.
Mr Sergio: Isn't that why the local municipality should have that flexibility --
Mr Cullen: Oh, absolutely.
Mr Sergio: -- to deal on a one-to-one basis with individual applications on their own merits? It is not choking that particular client if the client says: "I'm willing to pay because I understand the infrastructure is not there. The infrastructure is half a mile down the road," nothing to do with the exact site. But he understands the implications of the new development. It's bringing consequences down the road.
Mr Cullen: That's right.
Mr Sergio: He understands, he's willing to pay. It's got nothing to do with the new development, so the municipality should say, "Okay, fine; we are willing to give the approval."
Mr Cullen: This is the subject of negotiation --
Mr Sergio: Exactly.
Mr Cullen: -- between the municipality and developers. The ground rules in a community like ours in Ottawa-Carleton -- we've been growing for many, many years. We have good relationships with the developers. The ground rules are pretty well established. They understand that.
Mr Sergio: So shouldn't we, in 1998, allow for that flexibility?
The Chair: Excuse me. Mr Cullen, I thank you on behalf of the committee members for the opportunity to hear your views today. We appreciate you taking your time to come.
Ladies and gentlemen, that concludes the presentations for this morning. We'll take a recess and return at 1:00, please.
The committee recessed from 1206 to 1315.
The Chair: We'll welcome our first presenter for the afternoon, Mrs McGoldrick, councillor for the city of Nepean. Welcome.
Mrs Molly McGoldrick-Larsen: Just for the record, my surname is McGoldrick-Larsen.
The Chair: Sorry.
Mrs McGoldrick-Larsen: That's okay. It's quite a handle.
I'd just like to say good afternoon to you and thank you for the opportunity to speak with you this afternoon. Our mayor spoke here this morning, as you know. My overview will have a little bit different slant, so I won't be repeating exactly what the mayor said this morning.
Before I talk to you about Bill 98, I'd like to give you an overview of the ward I represent. The ward's name is Evergreen. It has a population of 27,000 people, with a geographic area of about 100 square miles. There are many unique aspects of Evergreen ward, but the most pertinent to Bill 98 is that it contains what we call the south Nepean growth area.
In the past five years, the population of this area has increased by about 9,000 residents. This is quite a contrast to the other residential neighbourhoods in Evergreen ward, which range from a community age of 40 years to 100 years old. I'd also like to point out at this time that the projected population for south Nepean in the next 10 years is 60,000 people. It is our only growth area in Nepean, and therefore the changes to the Development Charges Act would have great implications to the residents who would be residing in the new community.
Our mayor spoke to you this morning and gave you a brief overview of the city. I'm sure you're all quite aware of our good reputation in Nepean, our fiscal management and the fact that we're a debt-free city, what our population is and what have you. I know he went over that this morning with you. I also know that John Baird is a great supporter of the city of Nepean and is supportive of the policies the city of Nepean has lived under from the early 1970s. I won't belabour that, because I know you're aware of that.
One of the primary ways we have achieved the lowest tax rate in Ottawa was to eliminate any dependency on debt in the 1970s, thereby eliminating the payment of interest and using the money to provide services. The second way was to adopt the policy that growth would pay for growth. This policy is the primary way we provide the services and amenities to the new communities. We collect through the development charges and build the facilities and amenities that the community has come to buy into, if you will, in our city.
However, the proposed changes to Bill 98 would preclude the city of Nepean from continuing this policy and the standards our residents have chosen to have in their community, also new residents coming into the community. People are buying into a community; they're buying into the amenities and facilities and the quality of life we have to offer them through the policies and procedures we instituted years ago: the pay-as-you-go philosophy, the debt-free city etc. People have bought into that.
Existing Nepean residents and residents who have lived in the city for a great number of years know they have paid for the services and expect to receive the same level of service in their new community. When I ask people why they chose to buy a house in Nepean, one of the responses is its sound fiscal management.
I would suggest to you that a large number of residents in the city of Nepean know of our municipal policies that say we manage our affairs in a sound fiscal way. They know we're a debt-free city and they know how we got to be that way and why we have the standards we have. They bought into it and they want to remain that way.
They also say they moved to Nepean because of the excellent level of service and the programs and facilities we have to offer. I have noted lately that high-tech firms such as Nortel, Bell-Northern and Corel, when they're recruiting professionals to come to work in the Ottawa-Carleton area, are very quick to point out the high quality of life we enjoy in this community. Part of the reason we have that quality of life is the delivery of the programs and services we can offer through development charges.
Also, I'd like to point out that the home builders use existing community amenities to sell houses. When a resident goes to a community to buy a new house, in Longfields and Davidson Heights, which I'll talk about further on -- those are the names of the two communities where there have been about 3,200 homes built in Nepean in the past five years. You go to a sales office and what do they tell you about? They tell you about the Walter Baker Centre and the sportsplex. They talk about the green space we have, the Sachs forest that will be a natural forest area, that they will be able to enjoy this quality of life in the community, a park just down the street -- all the facilities we are able to provide to that community because of the development charges. People are buying into that.
I keep repeating myself but I think it's important, and maybe you've heard from other people this morning that this is important to people. They've chosen this. If you would like to go for a meal, you can choose to go to McDonald's or you can choose to go to Al's Steak House or Hy's. You can make that choice as an individual where you want to go and eat. You might choose one day to go to McDonald's and you might choose Hy's another day. When you're choosing a community that you want to live in and want your family to be brought up in, this is a big investment in an individual's life and people generally only do it once.
We have found that many residents moving to this new community I talk about, Longfields and Davidson Heights, are second-generation Nepean residents. These are people whose parents bought into the system and they are buying into the same system, the same services and the quality of life which their parents bought into.
The other major group of homeowners we're seeing there are empty-nesters, who are moving from existing residential communities in Nepean to smaller homes. They're choosing to stay within their same community because of the services provided and the standards which have been established that they have bought into.
Let's face it. The money has to come from somewhere. We all know that. I've been lobbied by home builders to eliminate or reduce development charges. I know that this morning Ben talked about the great success we had at the city of Nepean with the home builders' association and the different agencies that participated in a task committee with our staff to come up with a reduced development charge, which we instituted last spring.
We have worked with these agencies. I believe we can continue working with agencies, such as the home builders' association, land owners and what have you, and the community to make these adjustments rather than having legislation imposed that dictates exactly what standards we're able to provide, what quality of life and services we're able to provide to residents.
I point out that this Longfields and Davidson Heights area, which is part of the south urban community in Nepean, is the fastest-growing urban community in eastern Ontario. There will be significant impact on how that community develops as a result of any changes, if there are to be any, to the development charges. Right now, we have 3,200 homes there. There are some amenities close by, but I hear on a regular basis from residents who live there that they want to have services. They want to have a sports facility; they want to have community buildings; they wanted this winter to have an additional ice rink put into their community because they have nearly 8,000 people living there.
When you get 8,000 people living in a community, if you don't have services for them, what are they going to do? Are we going to see an increase in vandalism, an increase in youth problems, an increase in family problems because there are no services or amenities for those families to get out to enjoy a quality of life that other people in our community have gotten to enjoy?
I'm on the Nepean library board. We are known in Nepean to have a very high level of library service. Yes, our residents have chosen to have a high level of library service. We pay about $34 for library services. Other municipalities in Ottawa-Carleton have chosen not to do that. That's fine, if that's what their choice is, but we have chosen to pay for a higher level of service because that's what we want.
Coming back to McDonald's or Hy's, you can choose what you want. We would like to continue to be able to choose which services and the level of services and the amenities we have in the community.
As I'm sure the present government can appreciate our situation, I appreciate the government's situation in trying to turn the province around: create jobs, reduce the deficit. I know there had to be action taken, but how is the overall impact going to affect the individual resident? I think you have to consider this particular bill, Bill 98 and any amendments to it, in the larger picture. When you're looking at the Education Act and how that's going to change development charges, the hospitals, the school boards, the whole gamut, if you add all those numbers up and include this development charge, what's the bottom line going to be? I know the next speaker is going to expand on that so I won't go further into that.
In closing I just want to point out again that we do not want to see our growth area become an urban ghetto like some of the American cities, where they haven't had the ability to collect development charges to provide these amenities for the community. The people of Nepean, the older residents as well as the new residents, have bought into a quality of life that they are willing to pay for and that they desire.
In the early 1970s, residents supported the pay-as-you-go philosophy and still do. Existing homeowners who have paid taxes in Nepean for 40 years are not willing to pay an additional 10% or an additional 30% towards the libraries. If this bill goes through, you're talking about reducing our ability to collect for libraries down from 100% to 70%. Existing communities are not willing to pay that, so what are the ramifications going to be? Are people going to say, "We're not going to have growth in our communities"? What is the impact going to be on the quality of life for people who are there?
You might suggest that the private sector can pitch in and support these facilities, as they have done in the States. I know that the private sector contributes greatly to sporting organizations, to social services. They're very supportive of many aspects of the community, and I think there will be continued support required for those kinds of services. But if we can collect up front and provide those services, I think we should continue to do so.
The bottom line for me is that in my view this is not broken and we shouldn't fix it. I'm not saying we shouldn't continue to work towards improving it and that we shouldn't continue as municipalities to work with the home builders' associations and the builders to refine this a little more if it needs to be refined.
But what I suggest to you is that for the individual resident buying a new house, taking $1,000 off the total cost of their house is not the answer. They want those services. I'm the one who they phone when they say, "I just moved into Longfields and Davidson Heights and this is what I want to see in my community," and they don't want their taxes raised. If we can collect up front, we're providing those services. I believe all of you around this table know, as many other people in the House in Toronto know, how responsible we've been in the city of Nepean. If you can use us as an example to show others how this can be done, I think it would be more beneficial.
I leave you with that. I thank you for the opportunity and would welcome any questions.
Mr Galt: Thank you for the presentation and your passion on behalf of your community. Having a balanced budget is absolutely marvellous.
You mentioned that many of the people coming in buy into the community, the services, and the fact that it is debt-free, that they really like that. Going back to yesterday, there was a lot of concern expressed by the opposition that if we do reduce the development charges as is being proposed, will that really get passed on to the new home buyer? That's a negotiable type of thing. It depends on the open market just where that shakes down.
One of the ways -- this isn't being proposed, but I'm curious to know your response -- would be to put it right up front as sort of an add-on so they would see it in the price of a home, or it would be collected by the local municipality. Do you think if it was a true add-on being shown in the price of a house, the same people would still come to your community? If it was the other way, whereby the community had to collect it as a tax, the first tax on each new home buyer, do you think you'd still sell the same number of homes?
Mrs McGoldrick-Larsen: In fact I do. I have actually discussed this with a home builder. I know they don't like to collect it because it's a municipal tax, if you will. If there was a way in which it could be collected separately, I think residents would buy into it and it would be supported. Initially in your comment, you indicated that there was a question about whether reducing development charges would be passed on to the homeowner.
Mr Galt: This was a question the opposition was very concerned about yesterday.
Mrs McGoldrick-Larsen: I know that in Nepean we reduced the development charges last year 38% in the south Nepean growth area and 50% in the northern part of the city. To my knowledge, the homes did not go down that percentage to reflect the reduction in the development charges.
Mr Clement: Thank you very much for your commentary. You characterize things as a question of choice, and that's a very powerful analogy and concept. I liken it to my community: About a kilometre down the road is a new four-rink sportsplex that is servicing -- there's a new subdivision near my house, but my house has been around since 1972. I was there just the other weekend. I agree there has to be choice on some of these services like hockey rinks or libraries.
One of the arguments we've heard from other deputants, not all of them but some, has been that that kind of accountability has to be spread over not just the development charge, which is ultimately some form of charge that the new home buyer pays. Frequently that new home buyer also resides in the community as a renter or as a son or a daughter of a homeowner in your community already, and they're paying that. Ultimately, because a lot of these services like rinks and libraries are used by persons in the community other than the new home buyer, they have the right to make you accountable and you have the obligation to be accountable to them. The way to do that is to spread some of the costs on to the general tax base, not just on the development charge, which is a tax base for a new homeowner, but also the general tax base. That's the critique of the current state of affairs.
I'd like you to respond to that because you've put forward a powerful case. That's the powerful critique in reply to what you've said.
Mrs McGoldrick-Larsen: From my knowledge of how we operate the development charge at the city of Nepean, we only build on to facilities depending on growth, so right now what you're saying is that all of the taxpayers in Nepean should pay for another indoor pool in Nepean, if we build another indoor pool. What I'm saying is that we don't need another indoor pool right now because the population we have doesn't demand another indoor pool. If we have another 50,000 people who move to our municipality because we build more homes to house these 50,000 people, then we need another pool. The existing homeowners are going to use the other two pools that are already paid for.
Mr Clement: But it doesn't work out that way precisely. You know that, right?
Mrs McGoldrick-Larsen: Well --
The Chair: We have to move on. Sorry.
Mr Grandmaître: Thank you for your presentation. I'm somewhat familiar with the suburban area and you should be quite proud of your accomplishments over the last 20 or 25 years. You're quite eloquent when you talk about the quality of life and the impact of Bill 98.
I want to ask you a question. How would you describe your taxpayers? Would they be affluent people?
Mrs McGoldrick-Larsen: I would say yes, upper middle class. The majority of residents of Nepean are.
Mr Grandmaître: So you do specialize in attracting that type of taxpayer.
Mrs McGoldrick-Larsen: At the present time, the growth area in Nepean has a higher number of more affordable homes, primarily because of the market. We are trying to encourage more lower-middle-class, if you will, homes in to our community.
Mr Grandmaître: You just ran into my next question. How come you have the lowest number of social housing units in your area?
Mrs McGoldrick-Larsen: How come? Is it because when the community --
Mr Grandmaître: The price of land, services, taxes?
Mrs McGoldrick-Larsen: Is it that people couldn't afford to move out there that were of a lower --
Mr Grandmaître: So you don't have any land available for social housing?
Mrs McGoldrick-Larsen: No, we do, in fact. We have a number of social housing units.
Mr Grandmaître: Yes. You have 40-some --
Mrs McGoldrick-Larsen: Units?
Mr Grandmaître: -- whereas there are 46,000 --
Mrs McGoldrick-Larsen: No, I believe we have more than 47 social housing units in Nepean. I can submit up-to-date information on that.
Mr Grandmaître: What I'm trying to get at is that you have very, very few. In the Ottawa-Carleton area -- I'm talking about regional government -- they're saying, "We need more social housing." They're not going to locate in your ward, they're not going to locate in Nepean, they're not going to locate in Gloucester, for instance, because of development charges. Your land is very, very expensive and you're attracting the affluent people, the high-tech people. I congratulate you. You've done a great job of attracting these people.
I think Ottawa-Carleton has a social responsibility as well. It needs a social conscience. We have waiting lists as long as my arm, people waiting for affordable housing. My last question is, do you think that Bill 98 will resolve that affordability question?
Mrs McGoldrick-Larsen: I believe we would have the opportunity to provide more social housing through the Nepean Housing Corp if there were funds available through the provincial government to pursue further development. In this Longfields and Davidson Heights community that I speak of we have a Nepean Housing component of that community, and there was another development that was being planned and ready to go when the provincial government cut back the funds to develop more affordable housing.
I would certainly support more affordable housing going into Nepean if the opportunity was there through subsidy from the provincial government to do so.
Mr Grandmaître: Are you familiar with your development charges --
The Chair: Mr Grandmaître, I'm sorry. We should move to Mr Pouliot.
Mr Grandmaître: Very good. That's the last time I'm coming.
Mr Clement: Is that a promise or a threat?
Mr Pouliot: I too sense and very much appreciate your presentation and the sense of dedication and commitment to the people you represent. The manner of humanity that Nepean attracts has been described as upper middle class. What's upper middle class, family income of how much, grosso modo?
Mrs McGoldrick-Larsen: Oh, I would think in Nepean maybe $50,000 and up. I know that in the Barrhaven area the average family income is about $70,000 a year.
Mr Pouliot: About $56,000 in Ontario, so that is commendable indeed. You profess with pride, and justifiably so, that you are debt-free. I want to share this with you. This is what they refer to as spin doctoring. I was like you at one time, with respect, but I've read too many of these in the past 12 years, so I've become very much like me and it doesn't get better.
Bill 98, An Act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth -- people like yourself, presenter after presenter, have expressed some doubt. Some of them -- they're very polite and highly educated -- would term this to be hypocritical, to be a sham, a mask better suited for a cheap tombola. I mean, this is a professional forum, but people are saying, because they're deliberate and systematic: "No, no, no. You are rewarding" -- let's make no mistakes here. You treat your friends a little better, not a little worse. This is a reward for friends; ie, developers. The other side of the ledger is that you will be left holding the bag.
I have one question for you as you answer in terms of your ability in the future, as you see it, to stay debt-free. It's a difficult question for me to ask. Mike Harris, the Premier, has said that when all this downloading is done, the municipalities of Ontario by the year 2000, three years from now, should be able to reduce the municipal taxes -- it's all going to be general purpose -- by 10%. When you digest, when you assimilate everything that's coming down the pipe here, do you see yourself in three years with the good people of Nepean with the ability, and you're fiscally prudent, to reduce their municipal taxes by 10%? I'll believe you, but --
Mrs McGoldrick-Larsen: No, I don't.
Mr Pouliot: -- Premier Harris spoke first. I have to believe him. Do you see yourself -- you're right there.
Mrs McGoldrick-Larsen: No, we cannot. I predict right now, and I've told people publicly, that we would have to increase taxes between 10% and 20% if all of these changes come forward.
Mr Pouliot: Why is it I believe you and I don't believe Mike Harris?
The Chair: Thank you very much for taking the time to come before us today. We appreciate your perspective.
The Chair: Ladies and gentlemen, we now move to the next presenter, Mr Stein. Please come forward. Welcome, Mr Stein. We appreciate you taking the time to come today.
Mr Harry Stein: I know your problem with trying to get back to Toronto, so hopefully I'm going to be one of the really welcome presenters because I'm going to take about five minutes. I thought maybe I was last, but I'm not because I see Mr Meunier from Kanata behind me. I see he's already been promoted to mayor on this list, so it's a good thing he's the last presenter, he can celebrate.
I'd like to thank you for the opportunity of coming before this committee and speaking to you. I'm here as an ordinary citizen. I don't represent anybody, any city, although I do live in the city of Nepean.
My name is Harry Stein and I'm here as a senior homeowner who is very concerned about the proposed legislation. I'm also president of the Lynwood Village Community Association. Lynwood Village is a community with about 1,750 homes. It's an older community in the city of Nepean, in the west end of the region; Bell's Corners for those of you who are familiar with the layout. Our community was built 35 to 40 years ago.
I'd like to say that this is my first experience in dealing with an actual bill as opposed to newspapers' interpretations and other people's writings and so forth. I spent 30 years of my adult life in the Department of National Defence as a military officer and I thought we had the lock on convoluted and difficult language, but we don't hold a candle to the people who composed these documents. I'm going to try and give you my views on it, as I've read it and I frankly tell you it's as I've read it, so if you find some clangers in it, it's partly to do with the layout and content of this bill.
My first concern is that I was taught as a military officer that the most important part of any plan, analysis or any consideration is to be absolutely clear on what your aim or purpose is. I'm assuming that the aim of this bill is as stated in the front, An Act to promote job creation and increased municipal accountability while providing for the recovery of development costs related to new growth.
Let's take a look at the first aim, which is to promote job creation. I'm assuming that the logic here or the intent is that by reducing the prices of homes by lowering development charges, you increase the incidence of house purchases, thus spurring development and thus creating jobs. Jeez, I could get a job writing these bills, almost, after a sentence like that. If that's the right understanding, if that's what we're supposed to be doing here, let's analyse that.
My quick analysis, using a simple little mortgage book and so forth, tells me that the net effect of this proposed action will be way out of proportion with the effort being made to cause it. In other words, the cause-and-effect ratio of this exercise is a very unproductive return for the proposed legislation, even without consideration of what I consider to be other negative effects.
Let's take the example of a modest $150,000 new home. The estimated effect of Bill 98 on the current Nepean development charges will be in the order of somewhere around $1,000, we'll say. In other words, Nepean's reduced capacity to require the developer to pay for development could reduce the home cost to $149,000. If we further assume that the purchaser puts down a 10% down payment, that will leave us with a $135,000 balance, or $134,000 if the development charges are reduced. That's not unrealistic in today's market if we assume that a mortgage is taken out at 7% for a 25-year term. The difference in mortgage payments between $135,000 and $134,000 on that mortgage at 7%, 25-year term, is $7.01 per month. Let the interest rate rise from 7% to 8% and the monthly payment goes up by $94.20. Let the interest rate rise by 2% and the monthly payment for that house goes up by $191.30. That, to me, is what's going to affect whether a person buys the house.
The point of this little math exercise I've just gone through is to clearly demonstrate that it is interest rates and not minor changes in house costs which drive the housing market. Current low mortgage rates, together with banks courting first-time homeowners with new programs that just came out this week, will do more for housing starts than the effect of Bill 98 10 times over. What I'm really saying is, it's not worth doing for job creation purposes. That can't be the aim.
The city of Nepean recently reduced its development charges by over 50%, which is five times the possible effect of Bill 98 on those charges before they were reduced. That reduction was forced by competition and market forces in this region. The housing market does not need provincial encouragement of the kind portrayed here. It is my opinion that the objective of Bill 98 to promote job creation is ill-founded, unachievable and will be totally overwhelmed by any interest rate changes. I think the US market went up a quarter point today. My other part of my adult life was spent as an investment broker, so that's my interest in numbers as well.
I am not knowledgeable enough to speak to you on the aim of increased municipal accountability. The details of this intent here are not clear to me. I am confident that Nepean's accountability for development funds collected in the past has been above reproach and that the funds have been expended for the purposes for which they were collected. I have been involved in community affairs for over 15 years now.
Our city has already shown itself to be very supportive of developers' needs by a recent substantial decrease in development charges far in excess of what Bill 98 will require. To avoid penalizing such initiatives as Nepean has taken in the recent past due to its market pressures, Bill 98 should provide for exemptions for municipalities which have taken such actions in the recent past. In other words, there is absolutely no point in putting a second penalty on to Nepean, which has already gone way beyond what was the original purpose, as I see it, of this bill.
I am knowledgeable and fully capable of speaking about the future effects of Bill 98 on homeowners like myself in Lynwood Village. Bill 98 is just not fair. Homeowners who are living on fixed incomes after paying municipal taxes for 35 to 40 years in that community will be required to pay for part of development costs of future communities, in many cases paying for improvements from which they themselves have never yet benefited.
As I said earlier, our community is from 35 to 40 years old. We're still waiting for our first sidewalks. We got our first streetlights eight years ago and they're only on the intersections. We have half-kilometre lengths of streets that are black and dark. The ditches in front of our houses have disappeared finally with the pressure of a sewer separation project which was driven by the pressure to stop polluting rivers with overflowing sewage and had nothing to do with money being committed to improve our community. That sewer project cost us $3,000 per homeowner. The province also participated in that.
Nowadays new communities, at least in Nepean, have been constructed to modern standards with all utilities and services in place under a policy which Nepean has had for years of development paying for itself. In other words, when you buy your home, you pay for those things which you are going to use and need. I wish that had been done when our community was built. This policy requires developers to put up funds required to construct all the necessary components of a modern, environmentally sound community.
In my opinion, Bill 98 will do the following and have the following effects:
(1) All homeowners will be forced to pay through their taxes for infrastructure in future communities and for which they get no direct benefit or local improvement.
(2) Future communities may not be constructed up to recent modern standards due to the understandable reluctance of municipal councils to commit general tax revenues for these projects and opting instead for deferral until better economic times, especially right now with all the pressure on budgets and moneys available.
(3) The future of green space will be jeopardized by forbidding development funds to be used for parkland purchases. Nepean, which has a rich parkland heritage, will certainly be the poorer for that.
When one couples the potential property tax increase from Bill 98 with the looming effects of mega-week transfers regarding welfare and public housing -- I might add, if you are so concerned about public housing, why push it down to us? Keep it at the provincial level -- as well as a myriad of other responsibilities, including costly amalgamation and the cost of health care reform, the normal homeowner can only look forward with dread.
We have five levels of governance which are downloading on us: the feds, the NCC, the province of Ontario, the regional municipality of Ottawa-Carleton and the city of Nepean. Quite often it seems that each one is not aware of the actions of the others. Where it is very plainly seen is at the bottom of the barrel, as the income and property taxpayer.
Let me tell you, just in our community, the effects that are falling out in that. We have a little program of T-ball and soccer for kids four to seven years of age and it lasts six weeks in May and June. That's gone from being a free opportunity -- the kids came to do things -- until this year we have to come up with $430 worth of fees to pay for the grass fields we're using for six weeks to have our little kids play some ball. That doesn't sound like a lot of money. That's a hell of a pile of money for our community association to put together, along with our other costs.
As I said, we've had five levels dumping on us. There is only one set of pockets that's filling up all these financial pots. The taxpayer needs your help desperately. You can help by recommending the elimination of the future burden of Bill 98. It is not worth doing for the effect it will have, and much more importantly, it's just not fair. Thank you for your time.
Mr Grandmaître: Mr Stein, my interest in social housing is very simple. I'm very concerned that the provincial government is considering downloading that responsibility on to municipal governments, for the simple reason that I don't think we can afford it. I don't think there is a municipal government willing or ready to assume that responsibility. As you know, the social housing stock is an older stock, 25 or 30 or 35 years, and it would cost millions and millions of dollars -- I realize the present government is saying, "We're going to provide you with extra dollars so you can upgrade these units and do whatever you want with them," but I don't agree that municipal governments should be responsible for 86,000 units because we simply can't afford it.
You talked about the impact of Bill 98 and you also talked about interest rates. You agree with me, Mr Stein, that in the last seven or eight years mortgages have been more reasonable than in the past. My question is, what will it take for this government and future governments to entice developers to build more rental units? A lot of people can't afford to own their own homes and the number of rental units has gone down steadily and developers keep reminding us, "The interest rates are high; we're uncertain about tomorrow; people are uncertain about their jobs," and so on and so forth. We haven't found yet, when we were in government, when the NDP was in government, and now the Tory government, a solution to attract developers. Do you think Bill 98 will attract more developers?
Mr Stein: No, I certainly don't. I think, as I said clearly, the effect of Bill 98 on development per se and the cost of housing is so negligible that I can't even see it worth doing the exercise to put it in place and have to be managed. Coming back to the more general part of your question, it's a very simple thing. It's market forces that are going to move houses and get developers involved. If there's a chance to make a buck, they'll do it; if there isn't, they won't.
You were talking earlier with other speakers about the level of Nepean citizens' income and housing and all that. We've had plenty of very cheap housing available in Nepean in the last few years. You could buy a house in Nepean for well under $90,000 and lower. Why wasn't it being done? Get out your little mortgage books and have a look at what 9% is compared to 6.5% or 5% or so. That's what's moving the houses now. We're seeing a dramatic increase in housing movement in Ottawa-Carleton and a dramatic increase in building in the city of Nepean. That's the reason. It's interest rates.
Just to give you an example, my son is 34. Five years ago he bought a house and took out a five-year mortgage at 9.5%, and I nearly thrashed him for it. I said, "You're crazy to be doing that because interest rates are going to fall, definitely." He just remortgaged it and the difference is enough to pay for the new car he just bought. It's a $268-a-month difference.
Mr Grandmaître: In the GTA or the Metro area -- maybe Mr Clement can correct me -- housing starts have gone up by 44% or 45% and it's not happening in the Ottawa-Carleton area. Have you got a solution for this?
Mr Stein: I don't have that kind of knowledge. Certainly I read the papers and so forth and I'm under the impression that we've had quite a dramatic increase in just the last few months in the Ottawa-Carleton region.
Mr Grandmaître: Just the last few months, yes.
Mr Stein: Remember, you're talking here of a community that's had 40,000 job cuts in the federal government and so forth. This is not a land of opportunity where people are moving in because of wonderful jobs. There have been some really hard, threatening situations for a lot of people here, a lot of people who felt pretty comfortable with what they were doing and their future. It just went to pot in the last three or four or five years. That's part of it in the Ottawa-Carleton region. There are a number of things, but that's certainly part of it.
Mr Pouliot: I share your dilemma. I'm caught between the federal Liberals, if you wish, and the provincial Conservatives.
Mr Grandmaître: You're in good company.
Mr Pouliot: Did I hear you right when you mentioned that Mr Greenspan -- did they move today?
Mr Stein: I think that was the intent. I don't know for sure, but I think everyone is expecting a quarter point.
Mr Pouliot: So we don't know if they moved or not. My broker sounds like that. Whenever there's a rising market he's a genius and he tells me, "Buy, it's a rising market," and whenever the market goes down he goes for what he calls intrinsic value, the value of the stocks. Bottom up, top down, he terms things. He's very good. I'd much rather talk about that. It's better news.
You see, I too debate these things. There's been a 40%-some-odd increase in demand in housing construction. There's an attempt to compare it to the better years. Yet you have low interest rates. We're supposed to be in a recovery.
When I look at things like housing and I look at your situation -- not the people you represent, you're here as a private citizen, but the people you also represent, if you wish, de facto -- I tend to believe that demographics is two thirds of the housing situation, that the boom in housing will not happen, certainly in my lifetime, not with the same zest, with the same effervescence as in yesteryears. You will have some fluctuation -- low interest rates, a recovery -- but it's not likely that we will get the demand we had before.
Mr Stein: No, the demographics are clear on that.
Mr Pouliot: There is still quite a high inventory. Although it's moving, the upper end is not moving, and it's moving from within, so there's little need for expansion. But when we go to social housing, then we see the demographics at work. It tells the tale. Education, for instance, is predictable, Mr Stein; social housing is not. Ms Jones is 74 years old and she slips in the bathtub and dislocates her hip. We're all on a waiting list of sorts, and now the community is going to pay for that, and the list is almost endless.
I listened to you intently and I almost said, "Do we know the cost of this?" This is supposed to all take place next January 1. This is a small bill, but when we look at the overall picture, I go back, I live in Manitouwadge, and we go to Hudson Bay, Fort Severn and so on and when we meet with the different small municipalities, their problem is anxiety. They're not opposed to change, but I ask them: "What about the cost of policing? What about the cost of libraries? What about the cost of social housing?" That's all going to take place. Welfare: Now they don't know what's going to happen in welfare because they hear rumours. They don't know what the cost is and there are 10 to 15 items they have to reconcile.
One of them told me last week, "Gilles, if someone is on social assistance, on welfare, now we will have to pick up 50% of the drug costs. We have no one in our small municipality who can profess any expertise as to what the formulary is. How much is this going to cost? What about the ambulance? What about capital this and capital that?" That creates with the public just as much concern as the actual happening. People don't know the cost of the expertise. Do you sense that?
Mr Stein: No question of that. I represent a community that is very significantly composed of people who moved in 35 or 40 years ago and who now are senior citizens on fixed incomes. We've had a fair bit of turnover to younger families, but there are still many people there who were part of the original community. I was not using flowery language when I said we have a lot of citizens full of dread, and the dread is not knowing, just exactly what you said.
I'm grateful for the opportunity that this committee at least moves around and is talking to people and entertaining people to come and talk to it. God knows, we wish we'd get the same reaction from a number of other proposed programs that are coming our way, not the least of which is health reform and housing and welfare -- the welfare costs especially are scary -- and that will have some dramatic effects on the lifestyle of older folks who are sitting there. They don't even have an indexation of any pension fund whatsoever, and it's just dollars, dollars, dollars out the door. It's more of them every day. The not knowing part is very disconcerting certainly.
Mr Pouliot: The sky won't fall, Mr Stein, but the clouds are getting very low. I have said this many times. I spent my childhood next door -- you can tell by my accent -- 23 years downtown, 14 years on the waterfront, in Montreal. We didn't have much, but contrary to what some people believe, the waterfront is not as poor as the other areas of downtown, because the work was aplenty. I go back to the neighbourhood every year. We didn't have much. They have more today. But they don't have as much to look forward to.
We all need the changes. I did 10 years of municipal politics and I've been doing this thing for 12 years. I can digest some of the stuff, but my problem is I don't have the sentiment that they know what they're doing. They are so far out on a limb, they're in a mess, they're webbing their legislation, and I don't want to wish them well. I know where they emanate from. I know what passion, I know who they cater to, and it's not people like myself and it's not people like you. I want to thank you for your presentation. It takes courage.
Mr O'Toole: I'm intrigued with your comments, and I think there is much truth in it, that interest drives a consumer-based economy on large items like homes and cars and things like that, so I wouldn't disagree one bit with your analysis. I think you're right on. But I think the fundamental behind interest rate sensitivity basically is government action. Governments in themselves, by creation of money, ie debt and management of debt, can drive interest down. I think you'd agree, if you're an investment broker, that government action, whether it's Paul Martin -- I really applaud some of the things he's doing -- as well as our own government's action and many provinces -- Roy Romanow in Saskatchewan -- all dealing with debt.
Public debt means there's too much money unaccounted for, technically. Interest sensitivity, the government has a responsibility to have programs that balance in budgeting, which really looks at -- Moody's and the other bond rating agencies, as you well know, come forward and say, "Look at the amount of debt they've got," the amount of what I'd call overcapacity in their own economy -- I'm just trying help you there.
Interest is government policy and we're dealing with it. You can see the actions have really precipitated into some pretty strong paybacks for the government. In fact, the federal government's reclaiming part of its deficit is entirely the interest situation. They're paying less money for all the debt they owe. They haven't made one significant program change. This isn't politics, but I want you to understand that. That's my background, as well. I have a broker's licence and economics background.
One thing I wanted to bring to your attention is that you're a person on a fixed income. I'm moving, hopefully, in that direction. I'm still dumb enough to believe the freedom 55 stuff, that you'll be able to retire at 55 and live until you're 85. That implies that everything remains kind of flat because I'm now on a fixed income.
The cost of soft services, the arenas, the T-ball stadiums, the floodlit roller rinks, the cycle paths and all that we're building -- wonderful things. The only thing is, the capital cost is not the problem; the Rotary Club or the Lions Club takes care of that. My point is this: It's the operational cost. You and I are going to be taxed to death. In my home, with five children, I pay almost $6,000 in taxes. Just keeping track of the last decade, I'll be paying $7,000. That means I have to make about $18,000 to have $7,000 disposal income, because of the marginal tax rate, to pay my taxes. Do you understand what I'm saying? We cannot maintain the level of service we have, clear and simple. I'd love it.
Mr Stein: I'm sorry, do you have a question for me?
Mr O'Toole: Yes. The question I have for you is: Do you agree with my theory?
Mr Stein: No, I don't, on a number of things.
Mr O'Toole: I thought I had you completely convinced.
Mr Stein: Certainly, the first part I don't agree with. It used to be the fact that government could, in some ways, influence interest rates. I think you know as well, money flows so quickly globally today that a wave of dollars or anti-dollars can come this way to Canada and change our policy tomorrow. It will be interesting to see what happens in the next little while. It looks like our governor is going to try and go against the US curve. We're going to try and stay with no interest rate -- let's see how long that lasts. I suspect it won't last a month because the dollar will torpedo and the international money will force us, and that's what has moved our interest rates. Governments can talk as much as they want and come out with all these policies but it's strictly domestic.
I come to your last question, I guess it was a question, to do with maintenance. We've been pretty careful in Nepean I think in planning the operation of our facilities, in that I've gone to many council meetings and berated people about this and that and so forth on costs, but they're pretty clear to indicate what will be the operating costs and how that's going to be handled in the future. Yes, there's concern there but it's something that the city of Nepean and its staff and council have been aware of and are taking into account, whereas a lot of other places don't. Certainly, the federal government, in many of its programs, never considers what it's going to be the next year.
Mr Hardeman: If I could, Mr Stein, very quickly get back to Bill 98 and the development charges, you said the city has just recently reduced the development charges in its bylaw through negotiations with the development industry, and I presume with the community in general. When they did that, did they reduce the level of service they are charging for or did they find that in the past they had been charging for a level of service they were not building?
Mr Stein: There are two or three factors. There was quite a study done on it. First of all, it was competition in the region to begin with. Other communities were lowering development charges, so Nepean had to do that as well.
Mr Hardeman: But when they were doing that, in fairness, when they lowered them arbitrarily to be competitive, were they then taking tax dollars to fund the remainder?
Mr Stein: No. I want to finish the other half of that in that part of the reduction and part of the study was to determine how fast we had been growing and how fast it looked like, and this is the demographics of the future we were talking about earlier here. Growth is not going to be at the same speed at all. Therefore, the amount of funds that was needed over the next 10- or 15-year period to build the rink Mrs McGoldrick-Larsen talked about and so forth wasn't there; therefore they were able to show a reduction in the number of rinks, the number of this and that. It all worked out that charges could be lowered by that amount.
Mr Hardeman: I stand to be corrected, but if everyone is paying their fair share of growth cost, the speed of growth should not impact how much each door or each house has to pay, should it?
Mr Stein: Sure, because it influences the growth of the population, and that's when you need the things like rinks and those larger things that cost so much money.
Mr Hardeman: But if I buy one millionth of a $1-million rink, should it make any difference how long it takes to get to a million users?
Mr Stein: Sorry, give me that again.
Mr Hardeman: I said if my house is responsible to pay for one millionth of a new rink, which is going to cost $1 million, how long it takes to get there shouldn't make any difference.
Mr Stein: I see what you're getting at: the per-unit cost.
Mr Hardeman: In fairness, it's somewhat creative bookkeeping to be lowering the rates, because it's going to take longer to develop.
Mr Stein: I don't doubt that. There was a desire to do it. There's no question about that.
Mr Hardeman: Thank you. That's what I wanted to hear.
The Chair: I'm sorry, we have to break this off.
Mrs McGoldrick-Larsen: Would you allow me to add one thing to that?
The Chair: Very briefly.
Mrs McGoldrick-Larsen: I just wanted to add in response to that reduction, the other significant change in the Development Charges Act is that we amortized the stormwater ponds over 20 years rather than 10. The growth of the community was going to take 20 years, but it had been amortized previously over 10, so they expanded that out. That was very significant, and that was again the developer and the city working through that to come up with that.
Mr Grandmaître: But when you double the amortization you're doubling the cost.
The Chair: Thank you. We are slightly over time, but I appreciate your coming this afternoon. Mr Stein, you are the first citizen to come before us. We appreciate your civic-mindedness.
CITY OF KANATA
The Chair: We'll move to our final presenter for this afternoon, from the city of Kanata, Mr Meunier. Welcome. Your presentation will be 30 minutes, including questions from the caucuses. I apologize. We have inappropriately credited Mr Meunier as being the mayor. In fact, I understand he's the CAO of the city.
Mr Bert Meunier: That is correct. I wanted to correct that. I wouldn't want to have that promotion.
The Chair: Our error.
Mr Meunier: I've provided a copy of a written presentation. Mayor Nicholds wanted to be here this afternoon; at the last minute, she wasn't able to come. The committee has been spending a number of hours reviewing and receiving presentations, so I'm not going to bore you by reading this presentation but I would like to cover some of the highlights presented within the document.
Our first observation concerns our opinion that there seems to be a contradiction between the proposals that have been submitted under the revised Municipal Act and Bill 98. Our understanding is that the intent of the government is to give municipalities more autonomy and the ability to control their own affairs. We see the changes proposed by Bill 98 going in the opposite direction, if anything, in terms of imposing a number of restrictions in terms of how we do business, notwithstanding the fact that I think it does not recognize the differences that exist across the province between municipalities and it's going to have a different impact on different types of municipalities across the province. Wouldn't it be simpler to simply allow the municipality to govern its own affairs in that respect so it can react to its own environment? That's our first point.
The second point, which has a substantive impact on the city of Kanata, is the fact that we have been making business decisions based on existing rules of development charges. Those decisions are related to capital expenditure. You can appreciate the fact that those types of investments are long-term investments. If there are to be changes to the Development Charges Act in terms of how it's governed, some of the decisions that have already been made and committed to based on a business analysis of the past few years will be impacted because of the changes being proposed under the current bill.
The city of Kanata is not a mature municipality; it's a municipality that's in a very high-growth period of its life. We're developing our town centre; there are quite a number of residential neighbourhoods being developed. In that respect we have to look at providing the facilities required for that high growth. We're the municipality with the highest growth in the region here.
When we provide major facilities, you can't build 10% of an arena or 25% of a city hall. When we make a business decision to invest in a facility, we have to borrow to make sure they're available for the growth that is coming up. Those decisions were made at a time when the rules were set a certain way. If the rules are changed and do not allow for certain payments to be made against certain types of facilities, such as administrative facilities or recreational facilities, we have concerns that the investment that had been made in the past will not be able to be repaid and the municipality will be stuck with trying to raise a tax to provide for the debt payment for these particular facilities. We've elaborated on that in point 2 of our submission.
In point 3, we have a concern in terms of the indication that we're going to set the definition of the average service level within a municipality. Municipalities make different decisions based on their citizens in terms of the level of service for different services. The city of Kanata, as an example, has done extensive review with both our citizens and citizens' associations and also our builders in terms of identifying the proper level of service for certain types of services. In some cases, they are the lowest that the city of Kanata has had in the previous 10 years. In some cases, they are the highest because those are the services that our citizens want to have. If we dictate that the average of the 10-year period has to be the one that is set, that's going to cause us some problems in terms of some of the services preferred by our citizens. By definition, if you do the mathematical analysis, each time you pick a level of service that's below the average, the next time you review it your average has gone down. Why restrict the rules to dictate how this calculation is going to be made? We think it should continue to be flexible.
Point 4: In terms of the impact, we've done a detailed analysis of our capital plan, and because of the provisions that affect eligible expenditures in different types of categories, we've identified the impact on the city of Kanata.
To summarize, for the items that will not be covered in the future, under (a) the impact is roughly $1.7 million. For the category that will require a funding of 30%, the impact is $1.6 million. For the category that's going to require funding of 10%, the impact is $1.7 million. That totals approximately $5 million from 1999 to the year 2005. Why the year 1999? Because there's a transition period of 18 months, as we understand it, before these would come into effect.
We felt we had to express that $5 million in relationship to our capacity. For certain levels of government, federal or otherwise, $5 million may sound like not very much money, but to give you an appreciation of what that means for the city of Kanata, that $5 million as it pertains to our total capital program for those years is equal to 12% of our capital program. As it relates to the component that's only growth-related, that represents 22%.
Another figure I want to give you which is not in the text but gives you the impact of the magnitude is that a 1% tax increase for the city of Kanata covers $100,000. It's a bit less, as a matter of fact, than $100,000. For us to recuperate and provide for that $5 million would mean that we would have to increase taxes by 50%.
Those are the types of numbers we're talking about in terms of the impact of our analysis and, as best as we know, what the bill is proposing right now in terms of changes to the Development Charges Act.
The next point: There is a provision that says expansions will be covered up to 50%. We have concerns about that. We are unsure whether that applies to industrial buildings also. To give you an example, if tomorrow morning Newbridge proposed to increase by 50% one of their 10-storey buildings, does that mean they would be exempt? That would have a large impact on us. We're unsure as to this clause, but we would caution you in terms of its applicability in terms of industrial-commercial buildings.
Number 6 we have problems with, in terms of the definition of exclusion for our local services. I'll give you an example: We have made arrangements, with the cooperation of the builders in Ottawa-Carleton, where within the plan of subdivision -- some of the builders were complaining that they in their particular plan would have an arterial road or a collector road when the next subdivision or the one to the south of it might not have such a road, and why should they have the burden of that particular expenditure, even though it was within their own plan of subdivision?
They made that representation three years ago when we made one of the modifications to our bylaw, and we agreed with that. We provided that the municipality would provide for 35%. We calculated the additional costs of such a road compared to a local road and it was 35% more cost. We provided that the Development Charges Act would provide for 35% of funding back to that developer so that all developers within the city of Kanata would have the same level playing field. They thought it was great and we thought it was great and it was a good point that was made by them.
Our ability to do those types of analyses and to provide for that type of flexibility is going to be handicapped by definitions provided within the bill. The more of those types of rules that will be set in terms of which local services are included or excluded is going to prevent us from having the ability to have that flexibility. That's our point on point 6.
In terms of point 7, we have some concerns about the proposal, as we understand it, that before we calculate the development charges component and our contribution, we will have to take out any grants or any other sources of funding. That, in our opinion, goes contrary to a direction we were trying to do in Kanata, which is to establish partnership with either private companies or with public sector companies to fund certain projects.
An example: A couple of years ago we built the Kanata Theatre. That theatre, believe it or not, was funded one third by the Kanata Theatre, which had been fund-raising for 25 years to make sure they had funds available to build that building. That enabled us to build that building, and some of the other components came from other sources.
If we were in a scenario where we would not be able to recognize that and exclude it from the city's participation, it would handicap our ability to entertain those types of projects, because we're going to be hard-put to fund some of the other services we're looking at. That particular building, to complete that example, is operated 100% by the Kanata Theatre. It does not cost the city of Kanata a penny.
We have concern that the wording of the amendment is going to make it difficult or preclude our ability to enter into partnerships with third parties in terms of funding those types of projects.
In terms of point 8, we have some concerns and we're not sure of the interpretation: If we were to have credits in services payable right now to some developer, will the act provide that because of the reduction of 10% and 30%, the city is now going to have to find the money to pay for its share of those credits owed back to developers?
Number 9, a general comment based on some of the observations I've just made: Given the fact that a lot of our business decisions have been made under a system that has existed for 15 to 20 years, we find it difficult to suggest that now we're going to afford a transition period of 18 months and have the impact of these debt payments and other obligations that were undertaken under the old rules.
We do not agree with the amendments proposed under development charges, but if you were to proceed with them, we would suggest that you review the transition period in terms of its length or in terms of determining that certain things that have been done in the past are grandfathered so we don't have to go back and revisit those things and find new funds to pay those things back. Those are our suggestions.
That's the end of our presentation. I have attached to the presentation a detailed analysis of the projects affected under our capital plan. This is not all of our capital plan, only the component of the capital plan that is affected. You will notice that some of them indicate they are debt-related projects. Those are the ones I have mentioned where a decision has been made in the past, and we have some concern that we're going to have to find the money to fund those now. Out of the $5 million you will notice it's approximately 50% of that, so we've got $2.5 million of projects that are precommitted that, technically, under the new rules of the game, are not allowed and we would have to pick up some of that funding. We have some concerns about that.
At the end of the presentation, for your convenience, we've attached a copy of the city of Kanata's resolution with regard to the amendment. This was sent a number of months ago, but we've attached it just for your convenience. That's the end of my presentation.
M. Pouliot : Bonjour, Monsieur Meunier. La vie est belle ?
M. Meunier : La vie pourrait être plus belle.
Mr Pouliot: Oui. I see in your presentation, the last page has a resolution. Was it duly moved and passed by the members of council?
Mr Meunier: Yes. Somebody was mentioning to me before I left the office that maybe we should have attached with the original a duly signed copy. It's a copy of our resolution, but it was approved by council. As a matter of fact, as I said, it had been forwarded to the minister a number of weeks ago under separate cover.
Mr Pouliot: The operative clause is that it strongly opposes the new development charges legislation. Council sees right through the veil here of what is being done.
Your community is relatively new. In terms of your infrastructure, it's not fully domiciled, it's not fully built yet, right?
Mr Meunier: No. The municipality of Kanata is presently 55,000 population and is scheduled to grow to approximately 100,000, so we're almost looking at doubling, and that's according to the official plan of the region.
Mr Pouliot: I see. So when you have your assessment dollars, the development charges would fund the debentures. You go borrow money, the development charges pay the debt, right?
Mr Meunier: Five to seven years ago -- the municipality was quite young then, approximately 35,000 to 40,000 population -- we had a greater number of projects and there was quite a bit of borrowing for those projects. Recently we've tried to avoid that, but we still have a restricted number of projects that we have to consider because, as I explained earlier, it's very difficult. The delivery of service for capital is a step process. The politicians wait for a certain amount of political pressure to have their community centre, their pool or whatever, and then there comes a time where there's enough population there that want their service that you have to put the service in place, and it's not always the technical moment, that where you have one pool per 20,000 people, now's the time to built 100% of the pool.
Mr Pouliot: When I first moved -- and I was talking to you, I recall vividly -- I paid a development charge. Now I'm a homeowner and you're coming to knock on my door again for a tax levy because you no longer have the means, you no longer have the jurisdiction to levy. This is what Bill 98 says, but it also tells me as a consumer that I could pay twice. Is that not so?
Mr Meunier: Yes, it's part of --
Mr Pouliot: That doesn't make any sense.
Mr Meunier: If you read our presentation, it is written here that we have concern that we will be forced to double taxation, because people have already paid through development charges and now we're going to have to tax them for our inability to be able to provide for that.
Mr Pouliot: So I'm getting it right between the eyes. I mean, really. No question.
Mr Meunier: I'll let you be the judge of that.
Mr Pouliot: Thank you very kindly. I don't envy your job, sir. Thank you.
Mr Jerry J. Ouellette (Oshawa): Thank you very much for your presentation. A couple of quick questions. What method of reporting do you have to the various individuals who pay the development charges that they are actually being spent in those areas?
Mr Meunier: If you're familiar with the Development Charges Act, within the act it provides that we must do a fund accounting of our development charges a minimum of once a year. Under that legislative requirement we do that once per year, but we do not limit ourselves to that. We also do, almost on a yearly basis, a review of our Development Charges Act in Kanata where we sit down with three parties. The three parties are the community association representative that represents the citizen, the builders that represent the builders that pay for the charges in the city --
Mr Ouellette: That doesn't seem to be the norm through the province.
Mr Meunier: We not only do an accounting of our fund; we do an accounting of our service level. Our service level document -- I wouldn't want to bore you -- is about this thick, and it's developed page by page with the builders and the community association.
Mrs Marland: Are the books open then for anybody to see?
Mr Meunier: Definitely.
Mrs Marland: Thank you.
Mr Ouellette: As I mentioned, yesterday we heard quite the contrary from a number of communities, that that's not the case at all. So that's good.
One of the other questions: In your point 1 you had mentioned more authority. Yesterday we had a presentation that suggested that we proceed with more authority and I'd just like your comments on that. What about having the municipalities collect directly from the purchasers the development charges, as opposed to having the developers do that? What would be your position on that?
Mr Meunier: I'd have to think about that one. I'll give you the practical side of things from "un fonctionnaire" in terms of its applicability. We deal presently in the city of Kanata with maybe four or five major builders. It's very easy for us to develop a business relationship with these four or five builders so that if they collect through their sales and pay us, then it is easier in terms of accountability. I was giving you the example of changing some of the rules for our mutual benefit. It is also easier to deal with developers in terms of doing those types of exercises as opposed to dealing with people that are not a part of the community.
We also have a provision in Kanata, as an example, and I believe we were the first ones in Ontario to introduce that, where the builders can wait six months before they actually have to pay us. We give them a grace period. Those initiatives were put in place as a result of their representation with us in terms of helping them manage their own situation. Thinking out loud, I think it would be preferable to continue with the developers in that respect because it would make it very difficult with each one of the --
Mr Ouellette: The concern was that if it went to the municipality, then they would have to justify where it was being spent and the individuals would have more influence on how it was being spent.
Mr Hardeman: I just want to quickly go back to number 9 and your 18-month transition and your concern with that not being long enough. Could you elaborate on that just a little bit? I'm not sure if going longer would solve any of your concerns.
Mr Meunier: Two different points and the first one we would have stronger concerns about. The first one is that we as an example, specifically the city of Kanata, have a number of projects that we have built ahead of time. As I say, it is hard to wait until you get 50,000 people to say now we are going to build the arena, wait until there are exactly 50,000 because that's our level of service, one to 50,000. Usually what happens is that halfway through or in a progression you build the facilities. You don't have the money in hand to do that so you borrow the money.
Our concern is that we have done that for a number of our projects, and they are listed there. We will be paying for the debt of those. If they are declared projects that are not admissible for development charges, we will no longer be able to collect money in the future for the residual part that we've borrowed, if it was 40% or 25% or 50%, and we are going to have to turn to our existing payers to say we've borrowed to build a full arena or full city hall, now we're going to have to tax to provide for those debt payments. Our suggestion on that first point would be, if the rules change, would it be possible to grandfather those projects that existed under the previous provision? That's our first point.
The second point is in terms of our ability to turn around in terms of the $5 million impact in our total capital budget, because in our community it's a very serious discussion in terms of saying to people, "You know, the community centre we thought we had slated for 1998, well, now we have to provide 30% for that."
As a matter of fact, we have a point in case in Bridlewood. We had a facility that we had on the books for 1996. It was postponed for 1997 for feasibility study. The community has just come with a report to council, two weeks ago. They are expecting us to start building that in 1998 and we are now saying to them it looks like the provisions are going to change. Are we going to be faced with funding 30% of that? If that's the case, then we have to look at our other source of funding. We are maybe going to have to put this project off a while longer while we figure out how we are going to refund our total package. In the scope of a 10-year capital plan, 18 months is not a very long to turn around.
Mr Grandmaître: Bert, welcome. It is always nice to question a former employee.
Mr Meunier: Yes, Mr Mayor.
Mr Grandmaître: On page 1 of your presentation, very last paragraph, you say, "Since the City of Kanata currently collects development charges to make its debenture payments on facilities that have excess capacity...." Do you collect development charges to pay the interest rate on those debentures?
Mr Meunier: What we do is exactly the point that I was just making a few minutes ago. I'll give you an example. Our Kanata recreation complex, which is a two-ice complex that you may be familiar with, was built ahead of the full service level requirement.
Mr Grandmaître: Yes. I can understand.
Mr Meunier: Although the story is much longer, the city had to borrow against that project. So some of the existing use is being provided by the existing citizens, and some of the service level requirements for the future are built into that facility, because at the time they built it, they didn't necessarily need two ice. As a matter of fact, to make a point in case, the city was actually renting one ice out of the two, because they just didn't need it. So yes, we have built a facility for --
Mr Grandmaître: And that's my question, Bert. When you're looking at, let's say, a 15- or 20-year debenture, how can you estimate the development charges based on future interest that has to be paid on that debenture for the next 20 years?
Mr Meunier: Most of our projects are on a 10-year framework.
Mr Grandmaître: Okay, 10 years then.
Mr Meunier: As you know, those debentures are -- it's not like going to the bank on an open loan or a mortgage.
Mr Grandmaître: I know. They don't call it.
Mr Meunier: They don't call it, and it's for a fixed interest rate. So yes, we know the answer, we know our exact payments, we know when the payments are going to stop.
Mr Grandmaître: See, I'm learning something. My second question is, when you talked about the transition period not being long enough -- 18 months, if I'm not mistaken -- what will be the impact on let's say next year's budget? What will be the impact on your mill rate for next year on the number of capital programs?
Mr Meunier: If we translated the $4.923 million into a mill rate impact, as suggested, it's approximately --
Mr Grandmaître: I believe $100,000 is one mill.
Mr Meunier: Yes. So it's approximately 50%.
Mr Clement: For one year.
Mr Grandmaître: No, five years.
Mr Meunier: For the six-year period, 1999 to the year 2005.
Mr Grandmaître: That's 49%, sir. Yes, I follow you. He doesn't. I follow you.
Mr Clement: It doesn't work that way.
Mr Grandmaître: It does. So you would need to increase your mill rate by 49%.
Mr Meunier: Yes. Our analysis is the $5 million that we need from the year 1999 to the year 2005. That is a six-year period.
Mr Grandmaître: I get that.
Mr Meunier: And the equivalent mill rate room required over that six-year period is 50%.
Mr Grandmaître: Does that mean, Bert, that over the next six years, people in Kanata can expect a municipal tax increase of 8% or 9%?
Mr Meunier: No, I don't think so. That's the other side of the ledger in terms of saying -- what the municipality is going to be facing is some mill rate increase, but the reality as you well know, as a politician, is that the likely other component is a drastic reduction in the capital plan. If the developers think this is going to lead to the same level of service in terms of roads and other things, with the same provision, that's not going to happen. They're dreaming.
The Chair: Thank you very much for taking the time to come before the committee this afternoon. We appreciate hearing from you.
That's our last deputation for this afternoon. This committee will stand adjourned until tomorrow in St Catharines at 10 am.
The committee adjourned at 1450.