The transparent and equitable application of development contributions

One of the core impacts and influences on new housing costs, and therefore affordability, in British Columbia is the application of development contributions at the municipal level.  Whether they are referred to as Development Cost Charges (DCCs), Development Cost Levies (DCLs) or Community Amenity Contributions (CACs), individually or combined the cost must inevitably be passed onto the new homebuyer.

Intended to finance infrastructure associated with urban growth, the inherent principles that support the application of development contributions are sound.  Yet those principles are often at risk, or in some instances ignored, by the levying authority.  So what are some reasonable principles for infrastructure financing that both developers and homebuyers should expect from a levying authority?

1.     Need and Nexus

The need for infrastructure included in the development contribution plan must be clearly demonstrated (need) and the connection between the development and the demand created should be clearly established (nexus).

2.     Transparency

Both the method of calculating the development contribution and the manner in which it is applied should be clear, transparent and simple to understand and administer.

3.     Equity

Development contributions should be levied from all developments within a development contribution area based on their relative contribution to need.

4.      Certainty

All development contributions should be clearly identified and methods of accounting for escalation agreed upon at the commencement of a development.

5.     Efficiency

Development contributions should be justified on a whole of life capital cost basis consistent with maintaining financial discipline on service providers by precluding over recovery of costs.

6.     Consistency

Development contributions should be applied uniformly across a ‘Development Contribution Area’ and the methodology for applying contributions should be consistent.

7.     Right of consultation and arbitration

Land owners and developers have the right to be consulted on the manner in which development contributions are determined.  They should also have the opportunity to seek a review by an independent third party if they believe that the calculation of the contributions is not reasonable in accordance with set procedures.

8.      Accountability

There must be accountability in the manner in which development contributions are determined and expended.

If a municipality is not somewhat aligned with the above principles in their approach to the levying of development contributions it is worth questioning why that is the case – which leads us to the seventh principle and the right to review by an independent third party.  As a creature of the Provincial Government, local government, along with industry and the community, would be best served by a provincial mechanism that enables an independent review of the framework in which development contributions are levied.

The above posting represents the opinion of the author and not neccessarily UDI.

4 Comments

All good points.  However, I have a suggestion regarding how CACs/DCCs should be spent and allocated.  The City of Vancouver collects millions in CACs spending the money on things like public art and other unneccessary purchases.  While public art is worthwhile, expensditures on transit and roads should take prioity.  The entire province paid for the RAV line.  As a result of the RAV line, the COV has been able to upzone all of the properties along Cambie.  High-rises on Cambie would not have the same appeal without the transit access as paif for by the ENTIRE province, not the COV.  As the COV is "profiting" from the RAV line in its ability to collect CACs form the upzoning, that money (at least half) should be going directly to paying for future trnasit infrastructure (NOT to Translink for operating budgets).  If half the CACs collected along Cambie were applied to the Evergreen Line, I estimate they could pay for 1/4 to 1/2 of the cost.  This would insure the ENTIRE province did not have to pay 100% of the cost of another SkyTrain Line..  Similarly, a portion of the CACs collected from the City of Coquitlam should pay for the next extension of transit and so on.  Municipal governments should not be allowed to retain all of the CACs that result from an asset paid for by all of the taxpayers in the province.  'Just my thoughts,


 

Quick clarification to one of the points by 'Anonymous'. The Provcine does not pay 100% of the cost of the consturction of SkyTrain. In terms of the Evergreen Line -

  • Capital costs for the Evergreen Line are estimated at $1.4 billion.
  • The Province is contributing $583 million
  • The federal contribution is $417 million
  • TransLink is contributing $400 million

In relation to the CACs/ DCCs/ TIFFS - very much in support of all of the comments.

In my experience in several municipalities staff and councils alike are hopelessly addicted to the easy taxation of newcomers, who are disenfranchised, through CAC's. There will likely always be hidden extractions tied to the discretionary authority of rezoning. unless they are explicitly outlawed by senior government legislation, and there is a practical means to obtain refunds after a rezoning is granted without risk of repurcussion to those paying (e.g. regular audits by third party like UDI?).  Even the threat of losing the extraction (with a penalty?)  may be enough deterrent to eliminate the hidden extractions. Effective provincial government oversight/audit of the fee purposes, fee levels and funding distribution is required to achieve these laudable principles. A good start would be to outlaw 'percentage of uplift' fees tied to rezoning. Let the uplift be captured in higher annual property taxes.

 

 

A very thoughtful and useful starting point for discussions with all municipalities, especially those becoming 'addicted' to CAC's based on the 'lift' in land value which they believe may arise from a rezoning.