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Thursday, November 14, 2013

Planning applications: Who pays?

It took the Planning and Environment Committee only an hour, start to finish, to deal with the staff report on raising planning application fees.

Not bad, you say? After all, raising fees of any type is bound to create a negative response. And this was a public participation meeting. Probably lots of people lined up at the mics to get their oar in. Nobody likes fee hikes.
Not so fast. Although this was a public participation meeting, only one member of the “public”, Jim Kennedy representing stakeholder London Development Institute, appeared to make a statement, and a very brief one at that. He just thought this was all moving much too fast. They needed more consultation. Give it another two weeks.

No one on the committee or on staff thought that should be a problem. What is two weeks, after all? The mayor moved it and nearly an hour later, the committee voted unanimously to support a referral back to staff to have a few more chats with the industry.

So what could take an hour? With no actual decision at the end?

Planning staff had taken only a few minutes to lay out the report. Planning application fees hadn't increased since 2008. Back at the end of July 2013 council, in search of additional efficiencies and revenues to keep taxes down, had given a directive to staff to implement the action plans identified through the Price Waterhouse Coopers Internal Audit Report a month earlier.

That report had been succinct. The City of London was missing out on an opportunity to come closer to meeting its costs with respect to planning applications. Other municipalities of a similar size were charging more. London, on the other hand, was subsidizing the time and effort involved in this process with taxpayer dollars rather than asking the development industry to pay the full cost of the service. Of course, there was always the risk that increasing the fees could lead to less business. It was time to do a cost-benefit analysis.

This staff had done that and here was its recommendation. Increase the fees for an official plan amendment (OPA) from $6,000 to $10,000 and the cost of a zoning by-law amendment (ZBA) from $5,000 to $7,000. For a combined OPA and ZBA application, the cost would move from $10,500 to $15,000 since the work for the two applications would overlap.

If that sounds like a lot of money, keep in mind that developers don't ask for these unless there are some big dollars in the offing. The more units you can crowd onto a piece of land, the more the land is worth. Putting a luxury condo development or a highrise where once there was a community facility like a school is very lucrative. A few thousand dollars are certainly worth the millions that can be realized.

Not only to the landowner and the developer, of course, but also to the city in ongoing tax dollars, providing that the cost of services to the new houses or businesses is not too high.

In any case, staff had done the work and noted that fees in London are on the low end compared to other large communities. And that wasn't even taking into account the additional fees charged by some jurisdictions, especially the regional fees in a two-tiered municipality.

In fact, when all was said and done, the application fees covered only 26% of the costs incurred by the city. That meant that 74% would be borne by the taxpaying public. That seemed a little unfair, although of course the public also benefits from the process. It's a matter of balance. The proposed fee changes shouldn't have much impact on development applications since, if implemented, London would still be in the middle of the pack, and there were plenty of profits to be gained.

Staff also suggested that an automatic increase of 2 per cent per year from here on in might be in order in order to meet “anticipated costs”, but quickly retracted that suggestion when legal staff expressed its concern that those could be difficult to substantiate. All you can really talk about is what your actual costs are and under provincial legislation you can't charge more than what it costs you. The city is not in the business of making profits.

In the course of coming up with these new figures, the planning department had surveyed other communities, looked at what its actual costs were, and talked to stakeholders in the development industry.

But not nearly enough, Jim Kennedy complained. There had only been some meetings in the summer and then nothing until he saw the report on the internet last Thursday. There was probably some merit to raising the fees, he acknowledged. But not just yet. Let's talk a little more.

Some of the costs listed in the report were not of the industry's making, he complained; all that pre-application consultation and those community meetings. Why should the industry pay for them? Especially since the costs are ultimately passed on to the home buyer. Besides, they were competing with surrounding smaller communities with lower fees, and now the city was even suggesting extending services to Arva, in competition with development in London!

John Fleming, director of planning, said he'd be happy to speak further with stakeholders, but they had provided lots of opportunity already: a building liaison committee, meetings in his office, individual meetings, written feedback. And the report had been sent to the stakeholders a week ago, in advance of the publication on the city's website.

The mayor granted that it might be time for an increase in rates. After all, it wasn't that much in the scheme of things. He heard more complaints about how long the process takes; couldn’t they speed it up a bit? But an extra couple of weeks to mull this over with the industry shouldn't hurt. Some might wonder why it had taken so long; what the hell had they been doing in the last five years? But they could take this up again in a couple of weeks without a further public participation meeting. It was clear that the public wasn't interested.

Paul Hubert wanted to know how the city's cost recovery record compared with other municipalities. Did they also get back only 26% of their costs? He would like that information when the report came back in two weeks.

Dale Henderson was off on a different tangent entirely. How could they do things differently? He had some ideas coming at him. Maybe get developers pay for the infrastructure. Maybe put in some different, cheaper sewers. It was a bit of a jumble, confusing taxpayers with developers, but he ended with, “I would move that.” Since no one seemed to have a clue what “that” was, he failed to get a seconder.

Next came Sandy White. “That was a hard act to follow,” she giggled. But, in fact, she did so admirably, managing to insult not only Henderson but also Harold Usher and Paul Hubert with irrelevant, snide remarks and then wondering if Mr. Fleming might not find something in Kennedy’s criticisms that he could agree with. She had found it hard to hear from the mayor how things were done in some other communities. Maybe “we” could learn something.

Fleming pointed out that his report included details of the issues raised by the development industry and the planning department's responses. They were the same as those re-identified in Kennedy's most recent submission. But maybe there was some stone unturned. As for his department's processes, they were identified by the auditor as among the best practices. He could provide some comparative statistics; London looked pretty good. He took pride in moving things along quickly. But, of course, he was always prepared to improve.

White decided to be generous. In the future, she would be sure to preface her observations with some positive remarks, she condescended. In the meantime, she was gratified that he understood the need for improvement. It was an embarrassing moment.

Then Bud Polhill chimed in. He wanted to know if we are competitive with Kitchener which he believes is our main competition. This thing about regional fees. How much are they and how does adding them in affect Kitchener's fees? He doesn't place much faith in auditors; they just use numbers which cloud their vision.

Finally, Nancy Branscombe spoke up. She had been there in 2008 when the current fee structure had been introduced. It was the same angst in the industry then. But the fact was, the city was not even close to cost recovery. Council had asked all the departments to look for additional resources in its quest for a tax freeze. So what did they expect? There was a $700,000 gap and somebody had to pay for it, either the home buyer or the taxpayer. Where was the fairness? That's what they had to determine. She didn't want to throw a whole lot of other things into the mix, staff had enough to do as it was.

She took a shot at Henderson.

“The Planning Act is prescriptive,” she pointed out. “It's not as easy as ideas popping into your head. If it were, someone would have figured it out.”

She was prepared to support a referral, but she wanted to get on with it.

From her seat, and without waiting to be recognized, White yelled out, “Are the homeowner and the taxpayer the same person?”

Well, not really. And they were talking about the home buyer, the person who will ultimately cover the cost of increased fees when building a new home in a re-zoned area. Any costs that the buyer doesn't cover will have to be looked after by the rest of us who paid for the costs involved in building our new homes long ago.

Right now, that about three-quarters of the total cost of the applications.

The matter will come back to be considered again in two weeks. Perhaps by then White will have figured out the difference between taxes and fees.


Anonymous said...

nice to see who is in the developers' back pocket. Sure the fees will either be passed on in higher housing costs which are already significantly lower than Kitchener (Polhill is a twit of the highest order) if the developers can't see their way to lower their profit margins. No, don't suppose they would. We need more revenue so we will get it from kids going to skate or to swim. Heaven's forbid we hurt the poor developer and home builder. Oh, and by the way, only 20% of houses purchased each year are new, the rest are resale. So should people buying resale homes get a rebate from the city??

Colin Hendry said...

When prices of new homes go up, the price of all homes go up. The market price is a moving "average" based on the price of like properties. If you bought a mansion form $5000 in 1900, it is not worth $5000 today--is worth what the market place (people buying) will pay for it. It is also not appraised based on its 1900 value. Property taxes are based on "maket value".

Jenn Kaufmann said...

I don't see anything very productive that was said in that hour-long discussion. Looks to me like the work had already been done and all they had to do was make a decision and move on.......just because they don't see a reason NOT to defer it, doesn't mean it should be deferred. They had a job to do....and they didn't do it...