The province could change the way Waterloo region funds paramedics, parks and libraries

The province is proposing changes to the way municipalities collect development charges and that could impact how they fund things like paramedics, arenas, parks, parking and the airport.

That, in turn, could mean a rise in municipal taxes.

Development charges are one-time fees collected by municipalities from land developers, home builders and institutions.

The way local municipalities use the money from those charges impacts everyone's lives on a daily basis.

Filipa Reynolds, director of financial planning and deputy chief financial officer for the City of Waterloo explains the money helps pay for "a whole host of capital projects" including engineered projects, roads, water and wastewater, sanitary, as well as so-called "soft services" like paramedics, airports, community parks, libraries, parking, and indoor recreation facilities.

But that could change.

A staff report set to go before the region's administration and finance committee notes those soft services won't be allowed to be funded by development charges if the province's Bill 108, More Homes, More Choice Act passes.

Instead, municipalities would need to impose a "community benefit charge" against land.

Regional Chair Karen Redman says that raises some concerns for her.

"The government has agreed that expansion should pay for expansion, that development should pay for development, but then they go on to do things like separate development charges and they've also brought out a new regime called 'community benefits charge' and they've sort of separated what falls into the development charge basket and what falls into the community benefits charge," she said.

"I don't know if these community benefit charges are a good idea, but clearly [the province is] creating a new entity."

Changes to payment schedule

Another proposed change in Bill 108 is how municipalities would collect the money. Rather than one lump sum of money being required when a building permit is issued, the bill proposes six annual payments for industrial, commercial, institutional, non-profit and rental.

Redman says that would turn the region and other municipalities into a banker or lender, and she's not sure how that would work.

"Where's the leverage to go if someone decides that, they're a numbered company and they dissolve it after they've sold all the condominiums and built them — how do we go about collecting the subsequent years of development charges? It raises a lot of concerns," Redman said.

The change will impact local budgets, Reynolds says.

"In our capital budget, it's probably close to about half of our projects are development charge-related projects, so growth-related charges," she said.

From a cash flow perspective, Reynolds says moving to stretching payments over six years "can be quite an impact."

Ministry will consult

Municipal Affairs Minister Steve Clark says there are some benefits for municipalities in the bill, which includes allowing them to recover 100 per cent of waste diversion on developments. Currently municipalities must reduce the amount of money they recover on projects by 10 per cent.

Clark says he's received many positive comments from municipalities about the province's goal "to make a more transparent and predictable system."

"It's not just a capping of soft services, something like waste diversion is being added as an opportunity for municipalities to recover at that 100 per cent level," he noted of the changes proposed in Bill 108.

"The ministry will be consulting with municipalities before final decisions are made on the community benefits."

Changes announced Monday by Premier Doug Ford to funding models involving paramedics, public health and child care do not include the proposed changes to development charges in Bill 108, ministry staff said.

Municipalities in Ontario have until June 1 to submit comments on the bill, which also covers a wide range of topics including: cannabis, conservation authorities, education, endangered species, environmental assessments, environmental protections, labour relations, local planning appeal tribunal, occupational health and safety, heritage, and planning.

The sheer volume of the items in the bill, Redman says, is like "drinking out of a fire hose."

Staff are scrambling to figure out what the changes could mean for the region.

"The impact, it's taking us a while to parse it out," Redman said.

"We will put a response in because we have to," she added. "All of this, from my perspective, is not just about cost. It's not just about the cost-sharing. It's also the fundamental restructuring."

'A lot of gaps'

But there's another catch. Reynolds says they haven't actually seen the regulations surrounding development charges, so staff in cities across the province are making assumptions on what they think might be in them.

"We're saying that there could be financial impacts, like significant financial impacts, at this point without really understanding fully what it means," she said.

"We're doing the best we can with a lot of gaps in the information in the bill and trying to explain to our council what our concerns are so that we can satisfy those comments for June 1 and yet our biggest concern is, we haven't seen the regulation."

She adds, if the province changes the way development charges can be used to fund projects, "there will be pressure on the tax base to continue to make those projects a priority."

That means municipal taxes could go up, says regional councillor Sean Strickland, who is also chair of the region's administration and finance committee.

"This is a very significant change and if they restrict our ability as proposed in Bill 108 to collect development charges, so we collect essentially less, that means we have to raise taxes to pay for the services and or reduce our capital spending which reduces the amount of infrastructure we can put into place," Strickland said.

Waterloo, Kitchener and regional staff are all bringing forward reports this week to councils.

In the staff report going before the region's administration and finance committee, staff write that the proposed changes to development charges found in Bill 108 "will not meet the objectives of the province to increase housing supply and affordability."

The report also recommends asking the province to delay any proposed changes to development charges to mid or late 2020 in order to allow municipalities enough time for an "orderly transition."