Development Charge Decision Not About a Slight to the City of Waterloo

The recent development charge decision by Regional Council was not about a slight to the City of Waterloo, even if it looked like that on the surface. It was all about how Regional council decides to spend your tax dollars.

Certainly Waterloo councillors came at the last minute (this is OK, by the way, delegations do it all the time) with a proposal to phase in the regional increase in development charges for the Waterloo downtown core. Regional council then delayed the final vote on development charges to a sudden special meeting on June 27th at 3 pm.

At that time I was on my way to Britain on a ticket purchased long before this came up. Besides, when I left, the mood of council seemed to be that they would follow the recommendations of the council committee on new development charges with another look at Waterloo and other delegations’ requests. And in fact, when I returned two weeks later from my visit to Britain, the staff recommendation for that meeting that was sitting on my doorstep was to follow the original proposal and not give Waterloo the phase in.I was shocked to discover what really happened.

First let me explain that development charges are imposed on new building projects, whether residential, commercial or industrial, to help pay for the new services these projects need. Things like sewers, wastewater and water treatment plants, new roads.
Development charges for various reasons never cover the full cost of growth.

In this case, a number of years ago, the cities and the region waived the development fees for new buildings in the cores of Cambridge, Kitchener, and Waterloo. This was to help intensify the cores. Waterloo removed its exemption five years ago and the Region mirrored their removal with their own. Despite this, Waterloo has been doing so well, that over the past 15 years, Waterloo had 53 percent of the exemptions compared to Kitchener at 22 percent and Cambridge at 25 percent. As shown by all the new condos, Waterloo’s core is doing well.

The new proposed development charge bylaw stated that new industrial buildings would have a 50 percent reduction of charges to help bring industry to the region. I had concerns about this as Waterloo Region is actually doing spectacularly well attracting new industry as noted by the Globe and Mail, among others. The phase in of removing the core exemptions from Cambridge and Kitchener would cover the lost revenue from this new reduction for industry.

What happened instead? Council by 9 to 5 decided to not phase in the removal and instead just impose it in 2019. This also includes a new larger core area in Kitchener because the Region is still mirroring the city policies. The money from new buildings in the core expected over the next few years is not going to happen. Residents of Waterloo will be paying for new industrial buildings instead of a change that left the status quo for taxpayers.

That money to give new industrial buildings a break will now be financed by water and wastewater user fees or household property taxes to the tune of 13 million over the next five years. That’s about a a half a percent increase each year. If Waterloo decides to put its exemption back for its core, the amount goes up to 17 million.

Now maybe you think it’s a good thing to pay industry and developers to build here. However, the Region has also worked at bringing on the large lots industry wants on the Eastside, along with services. Just today, a column by the CEO of the Chamber of Commerce said more money to arts and culture will attract new industry. The LRT is already attracting industry and business into the cores. The universities with their knowledge workers attract commerce.

There have been questions on whether giving breaks to industry really works to improve a city. Not to mention all the other needs of our region. A service review by the Region for 500,000 which I did not agree with as we are already have service audits, is going ahead to find “efficiencies.” But because all the fat has been cut in the Region budget over the last few years, that must come out of programs, probably non-mandatory programs, like discretionary benefits.

Now we have money that could have gone to necessary services, or — I know this is heresy — back to the taxpayer, going to big breaks for developers and business.

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One response to “Development Charge Decision Not About a Slight to the City of Waterloo

  1. Thanks for this, Jane.

    We were all in shock as well…to be factual, our Waterloo $500K proposal didn’t even really get discussed on June 27th, as things moved pretty quickly towards the ultimate $10M+ decision and the door closed on the debate.

    Waterloo agreed philosophically that the core exemptions needed to go, as DC fees go to pay for incredibly important things: Water systems, parking, transit, roads. In the area municipalities, they fund recreation facilities, libraries, and fire halls. If we continue to waive them, they need to be paid for by tax rate increases and user fees. That isn’t a sustainable model.

    We are now asking “Where does it leave Waterloo?”

    Well, as of August 1st (and until Spring 2019), a developer can make a choice: Build in Kitchener or Cambridge … or spend a massive premium and build in Waterloo. That’s almost five solid years of competitive disadvantage and we anticipate that the impact on our core will stretch into the 2020’s. That’s a pretty disastrous outcome.

    From a council perspective, we need to make some choices … do we throw our hands up and walk away from a competition we didn’t want to be in (our $500K proposal was about smoothing the gap … we didn’t ask for this ‘opportunity’ to open up our DC Bylaw) OR do we go all in, telling our citizens to open up their wallets, as we are coming back in for $5M for core exemptions to maintain competitiveness. We will move quickly on this – it’s that important.

    Back to process …

    I keep asking people what the strategy was … the most interesting answer I received was “Strategy? What strategy?”

    There always needs to be strategy.

    a) As noted, we lifted our core exemptions because we bought into the Region’s philosophy – which still makes sense to me – that the LRT was, in part, designed to drive intensification in the cores. I sense from your post that you share that view.

    b) We are to come together as a region to join hands in an Economic Development group hug … yet this odd policy piece is passed, creating an immediate chasm of competition. This is, at the very least, counterproductive to the overarching EcDev goals. Bluntly, Waterloo’s success presents an opportunity that strong leaders should recognize as a superb possibility, not something to be squelched.

    c) Less than a week later, we – Kitchener, Cambridge, Waterloo – are directed by the Region to “carry the ball” when it comes to providing incentives for affordable housing in the cores.

    Here’s the strategy part: These three issues are linked. They need to be considered together, to actually work effectively.

    I look forward to further conversations about how to leverage Waterloo, within the Regional family.

    I will cross-post this on my blog as well.

    – Karen

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