Development Charges and the Failure of City Council

City council has made a terrible mistake. Tomorrow is their last day to fix it, but they won’t.

Last month, council made a rather bad decision. I don’t know if it was cowardly, opportunistic, jaded or cynical, but whatever the motivation of all but two council members, the decision to settle with developers and homebuilders–“cave to” might be more accurate–and lower development charges will hurt the city this year and for the rest of this council’s duration. It will hurt our finances; it will encourage sprawl; and it will do nothing to help the success of light rail, a rather important project the city currently has on the go.

Not only will it encourage sprawl, but it will degrade our suburbs. The homebuilders have conned the city into accepting the idea that our new communities deserve sub-par roads and parks. These people are looking to build new neighbourhoods on the cheap and still have the city subsidize their developments.

If you’re buying a new home in the coming years, it is likely that the company building your home has worked hard to ensure to lower your quality of life.

There are layers of problems here, some well-articulated by councillor Tobi Nussbaum who voted against capitulation (McKenney was the other).

First, this is a massive financial screw-up. We have development charges for a reason. It costs the city money to have new homes built, either in established neighbourhoods or new communities. There’s infrastructure, a lot of it: roads, transit, water, sewers, parks. You can’t just flatten a plot of land and plunk a house down.

We already know that sprawl costs the city a lot of money. Suburbs contribute a disproportionately small share of tax revenue for the services they demand. Now, the rest of the city has to foot part of maintaining them and for building them. It’s a gift to the homebuilders industry that you and I get to pay for.

Already this year we’re going to have give back more than $7M plus interest. It’s going to cost us tens of millions more over the next few years. We have a deficit and council is just pissing away millions for the sake of developers

It’s not as if development charges are chosen willy-nilly. There is an extensive and exhaustive process. The results are clearly documented. We really staff and consultants, specialists who understand the potential costs to Ottawa for new developments. We spend time and money on this report only to have council rip it up behind closed doors.

And there’s the next problem, there is no accountability on this. Council went in camera to discuss the matter, then came out with a rubber stamp for the proposed settlement. There’s no justification, no explanation. There’s no talk of how we’re going to recoup all the lost millions of dollars. We just get a press release that blatantly glosses over the issue. It’s contemptuous of citizens and staff, alike.

The press release is another problem. It gives us no real information. It talks about the settlement and the new and old amounts for the development charges, but it doesn’t ever talk about the percentage of the increase that was cut, which was about 25%. There’s no explanation how we could go through a long, careful process and supposedly have such a major screw-up in our calculations.

The city will talk compromise and how it worked with the homebuilders to come to a “fair” resolution…but we had a fair resolution last year. When the new development charges were proposed, we were told that they were defensible, that there was no major vulnerability from a legal challenge. They were fully substantiated.

Now we’re left with the impression that it was all a lie…except the people giving us that impression don’t even have the guts to come out and say so. Confidentiality and industry rule over democracy and prudent government. Thanks, guys. Bang up job you’re doing over at City Hall.

You might think that another troubling layer to this resolution is the precedent that it sets. The city no longer has control over our finances because homebuilders can threaten to take us to the OMB and we’ll just roll over. Sure, yeah, that’s a bad precedent. Worse, though, is that we have codified this neutering of government. According to the resolution, we can’t really make any changes to development charges without the okay from the development industry.

City council has willfully signed over it’s rightful power–it’s responsibility that is owed to us–to big corporations. Once again, thanks guys.

So this is all bad, really bad, for the city. The city has given up millions upon millions of dollars, authority over development charges and any precedent-setting backbone for future OMB challenges. You’d think we’d get something out of it, right?

You’d think that the biggest most vulnerable issue–LRT–would get settled and the city would have a bit of security when it came to this massive, massive project we’ve undertaken. C’mon, you really would think that. For all the cowardly rolling-over to industry this council does, you’d think that they’d insulate LRT from any further challenges relating to development charges.

You’d be wrong.

According to the resolution, “[t]here are however certain appeals that are not disposed of by this settlement and at this point are continuing”, including Development in the Vicinity of Transit Stations.

As you may or may not be aware, the city (notionally) wants LRT to succeed. To help that along, the plan is to increase density around LRT stations. It’s pretty basic logic: get more people living right close to transit hubs and you’ll get more people using transit. This is achieved in a few ways: allowing bigger, higher, denser developments is one way. Encouraging development is another.

As part of this encouragement, the city is lowering development charges around LRT stations. It might seem a little backwards (these potential residents will get more value form LRT than people moving to the exurbs), but the success of the LRT is key to the economic, environmental and personal health of the city. We’ll cut a bit of a deal because we’ll reap significant benefits.

Developers, apparently, don’t like that. They want to sprawl and they want people driving on cheaply-financed roads, apparently:

Several developers have appealed the elimination of the 50 per cent reduction in the roads component of the development charge for the construction of apartments, subject to limitations on provided parking, in the vicinity of transit stations. This hearing is also scheduled for January, 2016.

You have to be fucking kidding me. We’ve given away so much in this resolution–money, responsibility, authority, credibility, transparency–and it doesn’t even defend the biggest damned point in this whole issue.

This resolution is a massive, massive failure by city council. It’ll be approved, one would assume, by the OMB on Friday. Council sits tomorrow, but don’t expect any leadership or mettle. They’ve washed their hands, letting the development industry further erode our city.

Cowardice and cynicism rule at 101 Laurier Avenue West again.

Developers and Development Charges

City council made a bad decision this week…well, they made three bad decisions, but I’m only going to focus on one. Last year, the city increased development charges (DCs). This was a fine move. New builds are taxing on our city services and our city finances. New development isn’t inherently bad, but it is costly, and shouldn’t be subsidized by the rest of us.

Well, nothing is permanent, it seems. Homebuilder associations threatened to take the city to the Ontario Municipal Baord, so the city caved, slashing the increases and promising to never ever do anything to make these perfect, sainted, benevolent developers even slightly inconvenienced ever again (essentially).

I’m not going to get deep into it right now…mainly because Rideau-Rockliffe councillor Tobi Nussbaum’s statement is pretty perfect. (And I’m stealing it in its entirety and I hope Team Tobi doesn’t mind.)

At City Council today, I voted against a settlement agreement to resolve an appeal to the City’s updated development charges bylaw. Ottawa updated its development charges in 2014 and the Greater Ottawa Home Builders’ Association (GOHBA) and other developers subsequently appealed the decision at the Ontario Municipal Board.

The Province of Ontario requires municipalities to review and update their development charges every five years. The City collects development charges from homebuilders to pay for the increased capital costs of services such as new roads, water and sewer pipes and transit to accommodate residential growth. As a result of the settlement, the City will have to reimburse $7.4 million in collected development charges to builders and can expect to forego tens of millions of dollars in future revenue.

I voted against this proposed settlement agreement for two main reasons:

ACCOUNTABILITY

The settlement agreement goes far beyond the 2014 changes to the development charges. It includes a clause that would prohibit Council from introducing any new projects to its development charge system prior to January 1, 2019, unless the appellants agree. By approving this settlement, the City is giving the appellants a veto power over what City Council can do in relation to development charges for more than three years, eliminating the opportunity to include new projects as part of the next development charges review, expected in 2017. To use a concrete example, although Council had the right to impose a development charge to help offset capital costs for childcare, Council will be forbidden to do so by this settlement agreement unless the appealing developers agree.

TRANSPARENCY

The 2014 Development Charges By-law amendment was the subject of considerable consultation, both with the industry and with the broader public. City staff recommended approval of it to Council in June 2014 without any suggestion of legal risk. Given that city staff is now recommending drastic alterations to the recently adopted development charges, either Council was not properly informed of any legal risks at the time the changes were passed, or the city should not agree to settle and instead proceed to a hearing at the Ontario Municipal Board on the basis of the rigorous research, transparency and consultation that underlined the 2014 review.  Either possibility raises significant process issues.

For a public regulator to grant veto power over its future decisions to the very bodies it regulates raises serious concerns. Considering that the settlement agreement was passed at the same meeting that Council considered directions for its 2016 budget, which includes a $36 million-gap that needs to be filled, such a voluntary ceding of Council authority is both legally and financially problematic.

The city is obligated to demonstrate the highest level of openness and transparency, particularly when dealing with the development industry. A settlement agreement, negotiated and debated behind closed doors, that alters a publicly-consulted set of rules and provides veto power to developers over City decisions, does not meet that test. The result of that failure is a loss of public trust.

Nussbaum and Somerset councillor Catherine McKenney were the only two to vote against this horrendous motion. Good for them.

I get council’s desire to settle. The OMB is a monster, and has consistently sided with developers and against democracy. The provincial government is severely hurting the city by giving the OMB such expansive powers. It seems not a significant debate about urban development goes by that someone doesn’t express concern that the OMB will punish the city for a decision we might (and, usually, should) make.

But that doesn’t mean we turn over the keys to government to developers. It already seems like city council is in the pocket of corporations. Now, we’re just that much closer to codifying it.

Light Rail and Development Charges

There were a few interesting things to come out of today’s council meeting, and, with a bit of grace, I’ll actually get around to writing about them. For now, I want to focus on one measure that was defeated.

The city has implemented new development charges (or DCs, which I wrote about a week or two ago). DCs are the charges the cities levies against builders when they want to, you know, develop stuff. The charges vary depending on location (greater charges in the ‘burbs outside than greenbelt than inside, lesser charges for rural lands, especially ones without much certain services), and the purpose is to fund all the infrastructure that the new developments will demand (as a side benefit, which I imagine is intentional, DCs discourage sprawl, as they put upward pressure on home prices, especially the outer suburbs). They are, in many ways, a darn good thing (especially as the OMB has usurped much of Ottawa’s ability to control sprawl these past few years).

Today, there was a motion before council to halve the development charges for all new builds around the soon-to-be-constructed LRT stations. The argument is sound. The city wants dense hubs around these stations to make the LRT more attractive to more residents. It’s also a great way to make housing within the greenbelt more affordable (more units = downward pressure on price). I have not done–and will not do–any study into the incidence of DCs, but I imagine most, but not all, of the cost of the DCs are passed on to buyers/renters (this is generally what happens when government imposes fees, levies, tariffs or taxes–businesses will pass on as much of the added cost as they can, but demand elasticity will prevent them from passing on 100%).

As a result, the DCs will prove to be a discouragement (to an extent) to developers and to potential residents (again, to an extent).

If council were to pass such a measure, I really wouldn’t have too much of a beef. It is the city’s plan to intensify around these hubs, they allow developers to build higher and denser (which developers tend to like to do), and they really want a lot of people living there. Cutting these developers on consumers a break on DCs would work towards the city’s stated (and demonstrated) goal.

But the city didn’t, and, in the end, this is the right decision. First, the city is already cutting developers a break. Zoning restrictions are relaxed around these hubs, so more and higher development can occur. As we’ve seen with some recent planning committee fights, developers generally want to build out and build high. We don’t really need to additional incentives to achieve our goals.

As well, there will still be demands on city infrastructure by these new residents. As much as we’re trying to induce people to live near the LRT, we’re also build light rail that these eventual residents will get to use. You could argue that we’re already cutting them a break by allowing more of them easy access to the LRT.

In the end, the pros and cons are pretty much a wash. Neither side is wholly right and neither side is completely wrong. In fact, each argument in favour of one side can be turned around to actually be an argument against it, and vice versa. Consequently, it appears the city did the right thing. They have decided a fair charge for new development and they’re sticking to it. In the absence of especially special circumstances, the city should stick by the decision, otherwise there was little point in making the decision in the first place.