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Home My WebLink AboutFCS-11-108 - 2010 Development Charge Reserve FundREPORT TO:Finance and Corporate Services Committee DATE OF MEETING: June 20, 2011 SUBMITTED BY: Dan Chapman, Deputy CAO and City Treasurer PREPARED BY: Ruth-Anne Goetz, Senior Financial Analyst WARD(S) INVOLVED: All DATE OF REPORT: May 9, 2011 REPORT NO.: FCS-11-108 SUBJECT: 2010 Development Charge Reserve Fund RECOMMENDATION: For information. BACKGROUND: The Development Charges Act (1997) requires that the Treasurer submit to Council an annual statement of the Development Charge Reserve Fund. REPORT: Summary of Development Charges Legislation: The Development Charges Act, 1997 (the “Act”) provides the authority and process for the imposition and collection of development charges. Development charges (“DC’s”) are generally paid as a part of the building permit process, and are collected to fund growth-related capital costs for services as allowed by provincial legislation. Services are grouped into two categories – discounted services and non-discounted services. The Act requires that a discount of 10% be applied to the growth-related capital costs for discounted services when calculating development charge rates. Non-discounted services refer to services for which the legislation does not require a reduction. The following table shows which services within the City of Kitchener fit into the discounted and non-discounted categories: Discounted Services General Government Studies Parking Indoor Recreation Outdoor Recreation Cemeteries Library Public Works ×Úï ó ï Non-Discounted Roads and Related ServicesSanitary Servicing Watermains Storm/Watercourse Intensification Allowance Engineering Studies Fire A summary of the DC Reserve Fund by Category of Service is at Table A. Determination of Development Charges: A Development Charges Background Study is required to be completed when updating a Development Charges by-law. The by-law is then valid for a period of up to 5 years. The latest background study completed by the City was passed by Council on June 22, 2009, to establish development charges for the City of Kitchener. Amendments have since been made to this by-law to include Cemeteries as a service category (rate change effective June 1, 2010), and to decrease the development charge in relation to the Parking service category (rate change effective June 16, 2010). The by-law stipulates that the DC rates shall be indexed, effective January 1 of each year that the by-law remains in effect, based on the non-residential The 2010 DC rates are set out in construction price index, as provided by Statistics Canada. Table B. Revenue DC collections in 2010 total $11.6M, an increase from 2009 collections of $7.6M. Of the total revenue, $10.0M was attributable to residential development and $1.6M was for non-residential development. When the 2009 by-law was passed, it was determined that the Economic Development Investment Fund (EDIF) would fund the cost of any downtown exemptions provided during the year, as well as the 2009 non-residential rate phase in. In 2010, EDIF provided $0.02M for the downtown exemption, a decrease from 2009 when EDIF provided $0.2M for the downtown exemption, and $1.0M for the non-residential rate phase in. Expenses DC expenses to December 31, 2010 total $17.8M. DC expenses incurred during 2009 Detailed lists are included in the DC Reserve Fund Transactions in amounted to $11.9M. Tables C, D and E. Since 2004, the City charges different rates for the Central Neighbourhoods as compared to the Suburban Areas of the City (as defined in the DC by-law). Related revenues and expenses broken down by service are shown for both of these areas in Table E. Expenses are allocated to either the Central Neighbourhood or the Suburban Area based on whether the service is considered to be city wide, or related only to a specific area. If a service is considered city wide, the expense is allocated based on estimated population growth in each area as provided in the 2009 background study. ×Úï ó î Exemptions DC exemptions in 2010 total $2.8M compared to $1.0M in 2009. Of the total exemptions, $0.7M was attributable to residential development and $2.1M was for non-residential development. Major exemptions are the additional dwelling units in existing residential exemption, local board exemptions, redevelopment allowance and exemptions for municipal, provincial and school use. A summary of major exemptions is included in Table F. Debt No debt is outstanding in regards to any DC funded projects. Service-in-Lieu Credits The City may, by agreement, permit a developer to provide services for development of land in lieu of payment of the development charge. At December 31, 2010, credits of $2.4M were Table G for more details. outstanding compared to $3.5M at the end of 2009. Refer to Deferral Agreements At December 31, 2010, there were no deferral agreements outstanding. Reserve Fund Balances The DC Reserve Fund at December 31, 2010 was in a deficit position of $2.4M compared to a $3.8M surplus at the end of 2009. The overall reserve balance is broken out into further detail in Table E. The detail provided shows the balances in the Suburban Areas and the Central Neighbourhoods, which is then divided into Residential and Non-Residential services. These services are further divided into the Discounted and Non-Discounted categories, and then split into balances by service. Some services may reflect a deficit while others reflect a surplus. When a background study is completed, the reserve balances in each service are included in the development charge rate calculation, therefore over time, it is anticipated that the deficits will be recovered and the surpluses utilized. By-law A new DC by-law came into effect July 1, 2009 for a term of no longer than five years. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Community Priority: Development Strategic Direction: Manage growth and development relative to the Province’s “Places to Grow”, the “Regional Growth Management Strategy” and the “City of Kitchener’s Official Plan” with a view to the critical elements of a healthy community. FINANCIAL IMPLICATIONS: None. ×Úï ó í COMMUNITY ENGAGEMENT: A copy of this report will be provided to the Waterloo Region Home Builders’ Association and to the Minister of Municipal Affairs and Housing. ACKNOWLEDGED BY: D. 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