You've looked at your income. You know what your expenses are. You've got a budget. You have a debt but you're paying it down. But then along comes an opportunity that's just too good to pass up. So you put it on your credit card. But the payment's not in the budget. And along comes another great opportunity.
A couple of weeks ago, the Built and Natural Environment Committee received an update on the Growth Management Implementation Strategy (GMIS) which is the mechanism by which council gets a handle on how the city grows so that we don’t end up putting in services that can’t be paid for. At that meeting, a number of developers expressed unhappiness because they had a great piece of land on which they would like somebody to put houses, but first, they needed services—sewers, storm sewers, watermains, roads, etc.—which unfortunately weren’t in the immediate plan because the lots already serviced in the area hadn’t been built on yet. You can’t continue to lay the ground work with no uptake.
The developers were particularly upset because they wanted an escape hatch—a means of circumventing the GMIS—so that their particular project, which was unlike any other, could go ahead. They were annoyed that this had not yet been provided by staff; it was the only reason that they agreed with the GMIS in the first place.
On Wednesday, the recommended mechanism for dealing with extraordinary situations was presented to the members of the Finance and Administration Committee (FAC). Known as the Municipal Services Financing Agreement (MSFA) it basically looks like this:
The MFSA would a mechanism whereby a project which is not on the immediate horizon to would get the go ahead because it is assessed as providing great economic benefits such as new businesses or jobs or a new community use facility. In other words, an opportunity that is just too good to miss. The most that could be spent on this in a given year would be $5M or one fourth of the projected development revenues for the year. This would allow the developer to go ahead with the project by entering into a special or front-ending agreement with the city to make good on the development charges on a specific schedule rather than waiting until building permits are issued.
All this, of course, requires time and money to implement. Staff complements have not increased and, in fact, there is normally a 6 month waiting period before a departing staff member is replaced, a measure to save money.
At the FAC meeting, the proposal was explained to the committee members by consultant Gary Scanlan of Watson and Associates, the same consulting firm that had given council some good advice about dealing with the Urban Works Reserve Fund (UWRF), an accounting/banking system that allowed developers grow wherever they liked as long as they understood it might take a while to get paid back. That approach had ended up in a “notional” deficit situation of some $60M that resulted in a lot of changes in how the city dealt with these matters. That’s why we had to significantly increase development charges and implement a GMIS, so we were able to control the pace and direction of growth to be manageable within the city’s financial plan.
Scanlan pointed out the difficulties. London had taken a “wagon wheel” approach to development, moving out in all directions from the core. This was great for landowners but not so good for the city’s finances; it’s not an efficient use of services. That’s why we had to bring in a GMIS and take a lot of stuff out of the UWRF and move it over to the City Services Review Fund (CSRF) where it had to be dealt with by the budget. Without that control, the difference between revenues from building permits and expenses incurred in supplying the services would become untenable. Then you have a cash flow problem, not a good thing to have if you want a Triple A credit rating.
But now, the committee was looking at a way to get around the discipline imposed by the GMIS.
Not surprisingly, the London Development Institute (LDI) which represents developers in the area was not thrilled with some parts of the report, particularly the parts that talked about a $5M cap and an accelerated payment schedule. Also, they worried that the city wouldn’t make this mechanism available soon enough. They want to start right away. They sent an urgent letter to the committee letting it know about their concerns.
The Urban League, representing community associations and ratepayers groups, on the other hand, was supportive, but it didn’t want the MSFA to become simply a means of getting around the growth management implementation strategy, or “the son of Urban Works.” It also pointed out that council, in adopting this mechanism, would have to recognize that it would only be in unusual circumstances; it couldn’t accede to every request.
This point was re-stated several times by the consultant; the city has a growth management strategy which determines what services need to be put in place and when. The MFSA would be available only for exceptional or ad hoc situations. Criteria would have to be developed to ensure it would only be used as such. It’s not for not for leapfrogging of development.
The response of the committee members was quite predictable. Councillor Nancy Branscombe, who had wanted to see the abolition of the Urban Works Reserve Fund years ago, worried that this would become just another version of the same thing, Urban Works II.
She was not re-assured by the Mayor’s concern that the $5M cap was too low, it should be “flexible”, and we should be able to start using this right away in 2012; there were already a number of projects lining up. With a $5M cap, you could only do maybe one project a year.
“That’s really my biggest concern,” she warned. “We haven’t even voted on this and already we’re looking for ways to get around the GMIS.” She noted that this would be just a policy and “Council can override policy, they have done it.” She turned to Fontana. “With all due respect, Joe, we’re chomping at the bit with all those projects you want to entertain. Then we're back in the urban works reserve pickle.” She was concerned that this was going to turn into a fiasco; she would rather not have a policy at all rather than have it abused. It had to make financial sense.
Paul Hubert had another angle on it. He stressed the importance of treating this as an exception which required articulated principles that would have to be met on an ad hoc basis. “If we don’t have principles,” he told the mayor, “I feel sorry for you and staff because it will be a never ending parade to your office. Everybody has a good project.”
Dale Henderson wondered how to move along more quickly. He wondered if maybe developers might consider not getting paid back for up fronting some services; maybe find other ways to reward them. “If the developer doesn’t want his money back, I expect that would go forward quite quickly,” responded Scanlan, somewhat surprised by the question. He could see “a big smile on [the city treasurer’s] face if he didn’t have to pay.”
Henderson wanted a system whereby the city could decide who gets the nod. “You have that already, that’s what the GMIS does for you,” he was told.
“Is that measurable?” Henderson wanted to know. He seemed unaware the GMIS is based on many measurables: population projections, the status of development applications, the number of serviced lots, the available revenues, and that it is updated yearly, the last update having been received at the previous council meeting.
The matter of the resources available to staff to bring this to fruition concerned committee vice chair Judy Bryant. City treasurer Martin Hayward acknowledged that the resources needed to be beefed up. Staff was already pressed for time to handle all the tasks being assigned and there hadn’t been any new recruits. He would need additional money for specialized legal advice and consulting on development charges, especially if this was to go forward quickly.
And it seems there is some urgency. According to city manager, Jeff Fielding, the city may have its own project to advance. There have, apparently, been some big real estate deals at city hall recently, because the city is almost out of industrial land.
No details were provided.