Finally, some momentum on Development Cost Charges by City Hall. After deferring the issue, yet again, at the Monday City Council Meeting, it looks like a this issue will be finalized at the next meeting (February 20). The taxpayer has been overly subsidizing the development community by thousands of dollars on each lot developed here in Cranbrook. Cranbrook charges $2036 per lot to the developer. It costs the City substantially more to provide the extra infrastructure upgrades for roads, water and sewer to these lots. Most of the other communities in the East Kootenays charge higher DCC rates, such as Fernie $12,000 and Invermere $9480. The DCC rate is not a punitive measure but rather a way for the City to recover the costs of providing extra services to new lots without letting the burden fall on the taxpayer.
The City does provide the developers with "an assist". What that "assist" should be is part of the discussion going on right now at City Hall. Maybe, the City should look at the Growth Management Study (GMS) for which the citizens of this community paid $500,000 or $1000 for each page for an answer. Its recommendation concludes that DCC's should be raised considerably. It's time for developers to pay their fair share and its time for the City to make a decision on this contentious issue.
I would urge council carefully to review the DCC's and the impacts. Your mention of the "assist factors" makes it sound like the taxpayers are subsidizing development which is misleading.
ReplyDeleteHere is how development works... a developer is responsible for putting in all infrastructure into the new subdivision. This includes sewer, water, storms, sidewalks, curbs, gutters, lights etc. The developer is also required to contribute 5% of the land or 5% of the land value to the city. Further the developer is also required to pay development cost charges on a per lot basis.
The DCC charge is designed to be a fee that provides the city with funding for the burden on the existing infrastructure of the new development and for future upgrades to existing systems. Imagine a new house in a new development flushing a toilet...it goes down the new pipes that the developer paid for and connects to the existing old system which is where the burden comes in.
The DCC revenue then offset the costs to the taxpayer for upgrades to old infrastructure which not only benefits the new development but also the older areas too...but why should the developer pay for the old infrastructure...hence the assist factor. The assist factors under the community charter can be set by council to either stifle growth or to enhance growth.
If the council takes out the assist factor it would raise the DCC rate from $35,000 on a 1 ha parcel to $191,000 which could possibly exceed the land value and deter any future growth for small industry that is a huge employer in our city. If one does not believe this statement, take a drive through the industrial park and count all the businesses that have set up there in the past 10 years.
I would encourage anyone who supports a raise in DCC's to better understand the intent of the charges and to stop making the accusation that the taxpayers are subsidizing the developer.
The above blog post is highly misleading and has the potential to cause great economic damage to our community. You cannot attract new business to the community to create jobs and jack the DCC rates so high on commercial or industrial.
I do agree that the current residential DCC rate are too low at its average of 2200. HOwever when DCC's were first instated in the City in 1996 there was no new development or lands for 3 years, as that council had the formula wrong and was far too high for the market to absorb. Typically, if there is a new fees, laws, or changes in BC Building code those costs are typically passed on to the consumer and correlates to higher pricing for housing in the community.
There is a delicate balance that needs to be achieved here and I would hope the blog post authors would understand more about the DCCs as it is a pivotal decision that can affect the economy in our community for the next 3-6 years. For the record, I am not a developer but someone who understands fully the development process and impacts of government policy on an economy. This is an important decision, be sure to have a full knowledge.
Thanks for your comments - good summary of a complex issue that impacts our economy and growth. I urge Council to proceed cautiously with an informed opinion and lack of prejudice. Our economy and real estate market are becoming increasingly fragile.
Deletequick correction on a typo on my above post...2200 per residential lot should be 2000. The above case talking about dcc rates on 1 ha refers to an industrial parcel of land.
ReplyDeleteThose who admit to finding DCCs a complex topic but also understand Cranbrook's infrastructure deficit may find these documents and their recommendations informative:
ReplyDeletehttp://www.cscd.gov.bc.ca/lgd/intergov_relations/library/DCC_Best_Practice_Guide_2005.pdf
http://www.cscd.gov.bc.ca/lgd/intergov_relations/library/DCC_Elected_Officials_Guide_2005.pdf
and for readers who have not yet read the Growth Management Document Volume 1 p.32 found at: http://www.cranbrook.ca/index.php?option=com_content&view=article&id=340&Itemid=584
will provide insight into the necessity to raise what have been minimal DCC rates to a more acceptable and sensible level.
Case in hand... a small business wants to set up a small transportation warehouse of 2000 sq. ft on 2.5 acres in the industrial park. Currently, the city would require a DCC rate of $33,000. The land is worth approx 200,000. Take out the assist factor and that same small warehouse would then have to pay $191,000 in DCC which is almost equivalent to the land value. That is not "sensible" and will drive investment outside our borders. Take a look at area C and see how many small business are already operating on residential lands with large garages constructed. Some did this just too avoid the city taxes and the existing DCC rate...imagine what they would do if they were forced to pay 5.5 times the existing rate
ReplyDeleteI acknowledge that 2000 per residential lot is low in proportion to the land value but one also has to analyze the business and industrial rates too as they are part and parcel If you raise the DCC's too high you will not see development at all which then means no future revenues at all to fund the infrastructure deficit. Please tell me how much DCC revenue was collected between 1996 and 1999 on the residential portion when DCC rates were initiated and were far too high...My best guess is 0 residential dcc revenues.
I'm curious to know what Anonymous would consider a fair DCC charge/rate in the present economic climate?
ReplyDeleteAlba, do you think $191,000 on a 1 ha parcel of industrial land is fair. All I point out is that there needs to be a good strike of balance with the DCC By-law. The blog only refers to the residential rate, which I have agreed is too low but makes no reference to the current rates without an increase on commercial or industrial lands.
ReplyDeleteDCC rates are often determined by a formula for future needs of infrastruture and land base. It is not up to me to calculate that formula, but for the experts within the City engineering and administration and the Growth Management Study That formula needs to be accurate and is key in establishing a balanced and fair DCC rate. You then have the alternative of adjusting the "Assist Factors" through the powers of council.
All I point out in my post is that there is far more here than meets the eye, and for the original blog to state "It's time for developers to pay their fair share " is not accurate but implies that the taxpayer subsidizes development which is not the case. It is an ambiguous statement designed to mislead the reader into the conclusion that the taxpayer is subsidizing development.
Setting DCC rates is not an exercise in "sticking it to developers" to force them to pay their fair share... ultimately DCC's are passed on to those who purchase the serviced lots. If DCC's are set too high for the market to bear, development will cease, the prices for existing serviced lot inventory will soar and growth will be postponed. Land development is a very high risk venture and no one will attempt it if total development costs are too high for the market to bear.
ReplyDeleteYou stated Fernie's DCC at $12,000 and Invermere at $9,480... those levels were supported by residential lot market prices that were more than double those of Cranbrook. I agree that $2,000 per lot is low at today's market price in Cranbrook... perhaps $4,000 to $5,000 per residential lot would be supported.
DCC rates in the industrial lands must be considered carefully to avoid discouraging growth in small business and industry.
Be careful what you wish for... collecting a reasonable level of DCC's is better than no DCC revenue at all as we have seen in the past when high DCC's choked off residential development for years.
Thanks for sharing your thoughtful insights on DCC rates, Anonymous.
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