Town council not to pursue DC grant - offers different solution

An application under the Canada-Ontario Development Charge Reduction program will not be submitted by the Town of Amherstburg.

Citing too much risk and not enough reward, town council instead unanimously passed a motion put on the table by Councillor Peter Courtney that both provincial and federal levels of government create a grant program that would see consumers directly reimbursed by upper levels of government of development charges in order to incentivize home purchasing. He rejected the Canada-Ontario Development Charge Reduction program, stating “there’s nothing good about this one.”

A presentation was done at the start of the roughly 45-minute meeting this past Monday evening by CAO Valerie Critchley and Deputy CAO/director of development services Melissa Osborne, with Mayor Michael Prue saying the presentation was appreciated as it was a difficult grant process for council members and the general public to understand.

“It is a complex grant, so much so that I spent the better part of an hour on the phone with AMO (the Association of Municipalities of Ontario), the ministry (of municipal affairs and housing) and other administrators last Thursday getting details and trying to get the ins and outs of this,” said Critchley.

Another hour-long call was made earlier in the day Monday with Critchley, Osborne and staff from other municipalities trying to get clarification.

Critchley noted the town’s understanding of the program was correct, and that development charge-related projects that have already been covered by grant funding were not eligible for the new program.

Osborne stated there is a misconception that up to 90 per cent of reductions, either 30 or 50 per cent, could be covered by a grant. In Amherstburg’s case, road projects in the southeast quadrant such as Fryer St. and Lowes Side Road would have been covered, but the grant funding would have only covered development charges (DC’s) that would have been used in paying for that.

“It’s up to 90 per cent of recoverable DC’s for project costs,” she said. 

The road project would have been $8.6 million but Osborne stated calculations that $7.7 million would have been covered by the grant are incorrect.

“The actual math is that the grant would afford you $4.4 million and you would be paying $4.16 million of the project,” said Osborne.

Osborne said by not submitting the grant, the town would be eligible to leverage its development charges for services related to highway for $4.9 million collected through development charges for growth-related projects.

The second piece of the grant program is the town would have to give up 30-50 per cent of the entire development charges, she said, noting there are several types of development charges.

“You would have to reduce them by 30-50 per cent in totality but they’re made up of several different types of development charges,” said Osborne.

If the town were to cut DC’s by 30-50 per cent, revenue would be reduced by $3.5 million to $6.1 million. Osborne said the development charge related to highways would be the only DC category to benefit from the grant, but she said every other development charge that would be cut to get the grant, money must be replenished to those charges.

“Mathematically, what that means is of your lost revenue of $3.5 million to the $6.1 million, the only group that is benefitting makes up 13 per cent of your DC revenue,” said Osborne.

Money the town would have to make up would come through either tax increases, increases to such things as water and wastewater rates or the elimination of capital projects and redirecting reserve money to DC’s not benefitting from the grant.

“This is highly complex. It’s been a challenge for us to unravel and ask questions to get answers from the province and from other sources to make sure we understood it,” said Osborne.

Councillor Diane Pouget pointed out at least three other Essex County municipalities have applied for the funding and wondered “what the difference was between them and us?” Critchley noted the phone call earlier in the day was orchestrated by the Ministry of Municipal Affairs and Housing’s regional office in London as “they feared there was some confusion about how the grant would work.”

Critchley added it was made clear on the call that municipalities can only get 90 per cent of eligible DC’s back and that any DC’s not directly benefitting would have to be replenished.

“I think we may see some additional information coming from other administrations back to their councils,” she said, adding funding doesn’t have to be accepted or transfer agreements don’t have to be entered into.

Critchley said the province is doing its best to clarify information that has been put out. She added the call for grants went out June 2 and applications have to be in by June 19.

“That’s an extremely tight timeline to understand something of this magnitude and something that could have significant impacts for a capital budget for a municipality,” said Critchley.

Councillor Linden Crain interpreted Osborne’s report as it being not a grant that town council is not recommended to apply for. Osborne said it is a decision of council but administration put forth financial information and risks to proceed.

Osborne added before any project goes forward, a model to see how the DC’s would be applied would be run.     “What do we get and what do we give?” asked Councillor Don McArthur. 

McArthur asked if there is a risk of DC's being cut and not getting a grant. Osborne said the idea would have been to approve in principle and “the difference is rather than leveraging $4.4 million in your development charges reserve, you would get a grant. In return, you would reduce development charges so that the building community would pay half of what they’re paying now at which point you would create a deficit in the majority of those developers charges by not having received that revenue, giving them a discount, and you will need to increase taxes and/or user fees and/or cut other reserves to make those ones whole. That’s really the trade off.”

McArthur asked if the town would have been put at a competitive disadvantage, with Osborne doubting that it would. The deputy CAO added she wasn’t sure a reduction of DC’s would make or break a home sale, noting contacts in real estate say it’s still about “location, location, location.”

Deputy Mayor Chris Gibb wanted to know what happens if more homes are built in three years than projected, wondering if the town is giving more in DC discounts than the town is getting from the grant.

“It’s almost like we’re speculating here,” said Gibb.

Osborne said if more homes than anticipated, then more will become the responsibility of the community to replenish the funds. 

Prue said Leamington cut development charges “but it didn’t build a single house.” Osborne said Leamington was the only municipality she was aware of to eliminate DC’s for a time, but the DC’s are designed to “help growth pay for growth.”

Courtney thanked administration for clearing up issues and “decoding” the information. He said the application opportunity was like “two hands in the cookie jar, federal and provincial.” While there was no official recommendation from administration, he interpreted the information presented as it not being a smart move to proceed.

“There’s no guarantees here,” he said.

Courtney said mortgage rates “are going through the roof” and said “houses are not moving.” 

“I want to stay away from this, from all angles of it,” he said.

Courtney added there are 1,100 homes planned for the southeast quadrant of Amherstburg, but cautioned how many people can afford homes right now.“I don’t like any of this. I think it’s a shell game. I think we need to look at this from a mile high,” said Courtney. 

Courtney also pointed out the 17-day window to apply.

“How negligent is that?” he asked.

Noting he “is not testing the waters here,” Courtney added he is unwilling to apply under the proposed program.

“I say no, no, no,” he said.

Courtney made his motion, adding housing is a federal and provincial responsibility.

“Here’s the reality,” he said. “They want the town to take the risk and possibly not get the full reward.”

The motion would “throw it back in the faces” of upper levels of government and wanted to see a homeowner take documents to upper levels of government and ask for rebate cheque sent to their homes.

“Development charges are there to protect existing homeowners from shouldering the costs of new development,” said Gibb. “If we were successful (in the grant), this is just going to put costs on the existing homeowner they’d have to make up for.” Gibb added the Canada-Ontario Development Charge Reduction program works for Amherstburg and believed if upper levels of government want to reduce DC charges, “they should write a cheque directly to the homeowner.”“That’s really the simple way to do that,” he said. “I don’t want to see us put costs on our existing taxpayers to generate development.Crain said he liked the concept of a homeowner being able to control the reimbursement. He added development charge reductions will not lead to increased development.

“I don’t see it being effective,” he said. “I just find it overly complex and I don’t think it will be effective in the southeast quadrant.”“It has been said that this is not for towns like ours. This is for big cities,” added Prue. “This is for places like Mississauga, Brampton and Toronto, where development charges are over $100,000 each. This is not for a little place like this where we have to shave off a small percentage and people will still have to pay some. The reduction in the cost of a home in Amherstburg would be marginal.”

The mayor didn’t think the federal and provincial plan was well thought out.

“It was done in a hurry,” he said, hopeful other federal and provincial programs will be offered coming forward.

Pouget added she fully supported the motion.

“We’re not saying a flat out no. We’re saying no thank you. It would not be good for our community. Councillor Courtney is offering another idea on how they can help our community to grow,” she said.

Town council not to pursue DC grant - offers different solution

By Ron Giofu