Development Cost Charges

We have reposted this information on DCC's for those who continue to find this complex subject of interest.  It is important to remember the City's Growth Management Study contracted by the last Council in 2007 but not made public until 2011, made recommendations which would have resulted in significantly higher DCC's in certain areas than those which have been arrived at by this current council.  Through extensive consultation and debate, a compromise for the new rates has been tentatively reached and Council will soon complete the process of adoption.
DCC's are not a typical capital expense but part of the cost to a city for development.

To read the entire report on Development Cost Charges with the most recent calculations based on consultation and revision of the original recommendation go to p. 32 of part 1 of the Growth Management Study - Planning and Finance.

The complete study including the latest Excel DCC Spreadsheet demonstrating upcoming infrastructure costs can be read at:

http://www.cranbrook.ca/growth-management

The following excerpts on the basics are copied directly from the City's Growth Management Study released in 2010.

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Volume 1 Planning and Finance

One Grain at a Time

p.32

Development Cost Charges (DCCs)

Development Cost Charges are a form of levy which developers pay to a municipality to help fund major infrastructure projects which will provide benefit to the new development. The types of infrastructure for which DCCs can be collected, as well as guidance on how DCCs should be calculated, are largely prescribed by the Provincial Government.

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7.1. Background

The City of Cranbrook’s current DCC bylaw (Bylaw No. 3483) was adopted in 2004.  Since that time, the City’s boundary was expanded northward to include lands associated with the “Shadow Mountain” development. Furthermore, global exposure proliferated via the internet and Cranbrook’s international visitors, is fostering a growing recognition that Cranbrook is a community which offers a broad range of services and desirable amenities for all ages, lifestyles, and interests. Sustaining this reputation will help Cranbrook to weather periodic economic downturns and foster positive growth over the long term. It is, therefore, timely for the City to prepare a new DCC bylaw in order to better reflect current circumstances and the outcome of the water, sanitary sewer, and roads infrastructure plans undertaken as part of this GMS.

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A municipality’s ability to finance new infrastructure is governed by the B.C. Local Government Act sections 932-937. Through this legislation, the Provincial Government has empowered municipalities with the right to impose a Development Cost Charge (DCC) for major new infrastructure for providing, constructing, altering, or expanding facilities related to the following services:

° Roads, other than off street parking;

° Sewage systems;

° Water systems;

° Drainage systems; and

° Park land acquisition and improvement.

It is important to note that DCCs must be used only for the infrastructure for which they were collected and must not be used for any other infrastructure or purpose. However, temporary loans (with interest) are permitted between DCC reserves. The Provincial government has produced a Development Cost Charge Best Practices Guide (DCC Guide) that sets out guidelines and recommended best practices for establishing DCCs.

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One Grain at a Time

p.33

Table 12

SIX GUIDING PRINCIPLES FOR DCC DEVELOPMENT

Principle Definition

1. Integration  DCCs must be consistent with community plans, land use plans, corporate financial and capital infrastructure strategies.

2. Benefitter Pays  Costs should be borne by those who will use and benefit from the infrastructure.

3. Fairness and Equity DCCs should distribute costs fairly between existing users and future development, and equitably between different land uses.

4. Accountability  Development of DCCs should be a transparent process, accessible and understandable by stakeholders.

5. Certainty  Certainty should be built into the DCC process in terms of

stable charges and orderly construction of infrastructure.

6. Consultative Input  The DCC process must provide adequate opportunity for

meaningful and informed input from stakeholders.

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p.33

7.2. Development Cost Charge Bylaw

To establish DCCs, a special bylaw must be created and approved by the municipal Council and receive statutory approval from the Inspector of Municipalities.  The DCC bylaw outlines the conditions where DCCs will be levied as well as the particular rates in effect. A DCC Bylaw should contain, at a minimum, the following information:

° Municipal Council’s obligations when adopting the DCC Bylaw

° The types of capital costs to which DCC levies will apply

° When DCC levies will (or will not) be payable

° When DCC levies will be collected

° The specific DCC to be levied, detailed (with maps and rate schedules) as

applicable by:

 - Municipal zoning (area of city)

 - Type of service (water, roads, etc.)

 - Type of land use (residential, commercial etc.)

° Provisions and conditions for grace periods, installment payments,

credits/rebates, penalties, interest, etc.

° Handling of DCC reserves established by Council

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7.3. Municipal Assist Factor

The Local Government Act neither contains explicit reference to a “municipal assist factor” nor does it specify the magnitude of this assistance. As a matter of Provincial policy, a requirement exists for a local government to provide some level of financial assistance to these capital costs in terms of the portion eligible for DCCs. The generally accepted minimum municipal assist factor for a DCC service category is 1%. While a higher assist factor may reflect a desire to promote new development, a higher percentage means that a greater proportion of the financing of new growth would be subsidized by the existing tax base. Alternately, a low assist factor may indicate that a municipality has chosen not to provide as much financial assistance towards new growth.

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8. City of Cranbrook Preliminary Draft DCC

8.1. Preliminary Draft Status

Through the studies undertaken as part of this Growth Management Study pertaining to the City’s road, water, and sanitary sewer infrastructure (GMS Volumes 2, 3, and 4) significant capital projects deemed necessary to offer continued service to the existing population and required to service new growth were identified. High level costs were estimated for each of the capital projects and assumptions were specified regarding the proportion of these costs attributable to new development, and therefore eligible to be paid by DCCs.  This initial draft of the DCC bylaw is considered preliminary as particular information gaps remain to be completed out in order to complete the Development Cost Charge bylaw.  To complete a comprehensive update of the DCC bylaw, consideration should be given to updating the City’s plans for parkland acquisition and improvement, as well as management of storm drainage. Capital projects and cost estimates should be prepared for these components in order that the full spectrum of DCC categories is considered in the new DCC bylaw.

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The concept of a municipal “assist factor” arises from the Local Government Act provision in section 933 which states that the purpose of DCCs is to assist local government to pay for infrastructure and parks, thereby implying that 100% of the cost should not be charged to new development. The “assist factor” represents the level of financial assistance provided by the local government. Updating the municipal assist factor for the City of Cranbrook’s new DCC bylaw requires deliberations amongst the City’s leadership, senior staff and should form part of the consultation process involving stakeholders such as development industry representatives, and City taxpayers.

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8.3. Standard Assumptions

Preparation of the preliminary draft DCC required the definition of a series of assumptions presented below in Table 17. These assumptions were formulated to be in accordance with the Official Community Plan, and utilize base population data from the most recent Census year (2006). Forecasts of new residential, commercial, industrial, and institutional space is based on development information provided by City of Cranbrook and density objectives expressed in the Official Community Plan reflecting a move towards more sustainable development targets such as infill and multiple family residential close to downtown, and a higher Floor Area Ratio (FAR) achieved by new commercial development. These parameters are explained in Section 5.3 Commercial Forecast.

Table 17

PRELIMINARY DCC BYLAW - STANDARD ASSUMPTIONS

Growth Assumptions Value

1. Average # Persons per Dwelling Unit 2.3

o Average # Persons per Low Density Dwelling Unit (11 units per Ha) 3.0

o Average # Persons per Medium Density Dwelling Unit (30 units per Ha) 2.3

o Average # Persons per High Density Dwelling Unit (40 units per Ha) 1.6

2. Base Population for City of Cranbrook (from 2006 Census) 18,267

3. Estimated Population at Build-Out within Current City Boundary 36,000

4. Population Increase 17,733

5. Average Annual Rate of Population Growth 1.2%

6. Total New Commercial Floor Area (sq. meters) 100,200

7. Total New Industrial Development (hectares) 86.0

8. Total New Institutional Floor Area (sq. meters) 78,329

Municipal Assist Factors

1. Municipal Assist: Road System 51%

2. Municipal Assist: Water System 11%

3. Municipal Assist: Storm Drainage System 51%

4. Municipal Assist: Sewage System 11%

continue at: http://www.cranbrook.ca/growth-management