HomeMy WebLinkAboutCAO-13-018 - Downtown Financial Incentive Review - Launch of Public Consultation Phase
Finance & Corporate Services Committee
May 27, 2013
Rod Regier, Executive Director or Economic Development
519-741-2200 ext 7506
Cory Bluhm, Manager of Downtown Development
519-741-2200ext 7065
9& 10
May 13, 2013
CAO-13-018
Downtown Financial Incentive Review
Launch of Public Consultation Phase
That the nancial Incentive Review
be received for information, as attached to report CAO-13-018; and,
That staff be directed to proceed with public consultation as outlined in report CAO-13-018.
The Downtown Kitchener Action Plan 2012-2016 recommends that the City review its financial
incentive programs to ensure they support and enable the objectives outlined in the Action Plan.
The review of the Downtown Financial Incentive Program will occur in two phases:
1) Phase 1 - Discussion Paper/public consultation leading to preliminary recommendations
on what changes, if any, should be made (during the Summer and early Fall of 2013);
and,
2) Phase 2 - If as part of Phase 1, City Council makes recommendations to modify or
repeal any of the incentive programs, or recommends establishing any new programs,
such changes would occur in accordance with the processes prescribed by the Ontario
Planning Act and the Municipal Act (beginning as early as late Fall 2013).
The initial findings of City staff review of the existing Downtown Financial Incentive Program
are contained in the attached Discussion Paper. Staff recommend undertaking a public
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consultation process prior to discussions and recommendations at City Council. This will
include, but not limited to:
- Information packages will be sent to developers and land owners currently in the
planning phases of downtown development projects;
- Newspaper advertisement inviting community and stakeholder input;
- One-on-one meetings with interested stakeholders, developers and land owners; and,
- Consultation with Regional staff, the Downtown Kitchener BIA, Economic Development
Advisory Committee and the Downtown Action & Advisory Committee.
A full presentation will be made to a Committee of Council with initial discussion in the latter part
of the Summer.A final discussion with Council, including consideration of recommendations, is
expected to occur in the early part of the Fall.On both occasions, staff will share with Council
the public input received to date.
None at this time. Any budget implications will be outlined once formal recommendations are
presented in the Fall.
See report section of this report.
It is important to consider community and stakeholder input prior to recommending any changes
to the Downtown Financial Incentive Program.
ATTACHMENTS:
Downtown Financial Incentives Review Discussion Paper
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SPRING 2013
CAOÈs Office à Economic Development
Downtown Financial Incentive Review
Discussion Paper
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Table of Contents
1.0 Overview ................................................................ 2
2.0 DowntownÈs Current Economic Context ................................................................ 5
3.0 Evaluation of Existing Downtown Financial Incentive Programs................................... 12
4.0 CityÈs Capacity to Fund Financial Incentives ................................................................ 17
5.0 Options for Incentive Programs Moving Forward ........................................................... 18
6.0 Preliminary Recommendations ................................................................ 22
7.0 Appendices ................................................................ 23
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PAGE
Section
1
Overview
Purpose
The purpose of this discussion paper is to evaluate the existing
determine if they are still relevant and purposeful given the cu
well as current municipal policy objectives. While this paper d
City Council to consider, formal changes to any programs would h
essence, this paper is simply phase one of a two phase process.
actions as the development of the new Development Charges Bylaw,
Community Improvement Plans (ie: incentive programs) or the deve
Improvement Plan(s). Phase two would only happen once City Coun
discussion paper.
Historical Context
Much of todayÈs Downtown financial incentive program originated
Force report. At that time, the community was just beginning to
history. Big-box retail was becoming a dominant new format in t
competition with Downtown merchants. Significant suburban expan
and Laurentian West would continue to shift our community toward
further de-intensifying the centre of the city. Multiple downto
the brink of closure. Both Market Square and King Centre malls
Downtown reclaim its commercial relevance, and to attract new in
a Çpro-businessÈ solution that included:
Streamlining of development approvals;
Wide-open zoning; and,
A package of financial incentives that would eliminate most deve
A 3-year exemption from 50% of any post-redevelopment tax increa
present);
Rebates for planning application and building permit fees (1997
Exemptions from parkland dedication fees (1995 - present)
A faade improvement loan/grant program (1997 - 2009); and,
Exemptions from development charges (1999 - present).
Essentially, the City was Çopen-for-businessÈ, willing to accept
with very few imposed requirements. These incentives proved cri
developments, such as the Kaufman Lofts, Lang Tannery, Breithaup
requirements meant any and all projects would be funded, even if
quality use or design. For example, the apartment building at 5
criticized for its building design, yet received in excess of $1
In 2005 and 2009, two new programs, the Upper-Storey Renovation
Program respectively, were introduced. Both programs were devel
Development Investment Fund (EDIF) and intended to compliment ma
new King Street Streetscape. With greater importance being plac
programs included stricter eligibility requirements. In the cas
must generally satisfy the goals of the King Street Faade Guide
2008. As a result, these programs consistently produced higher
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Current Context
Today, DowntownÈs economic climate has improved remarkably since
UW School of Pharmacy, WLU Faculty of Social Work, King Street S
have been successful in stimulating private sector interest in m
private sector investments, such as The Tannery, Kaufman Lofts a
showcase new market opportunities in the core. The impending ar
central transit hub have also generated new optimism and interes
Downtown Kitchener is poised to enter perhaps the most significa
projects such as the Breithaupt Block, Consolidated Courthouse a
But it is only now, that the programs developed in the 90s are beginning to bear f
Condominiums and One Victoria are the first non-adaptive reuse,
the market for new construction. And as the ÇDowntownÈs Current
2), these types of projects may not be feasible without the aid
downtown projects are still not at a point where major redevelop
for projects to proceed without incentives.
Relevant Policy Objectives
The are many municipal policy objectives that could be addressed
following is a list of the objectives most likely to achieve res
1) - presently more than 13,000 people work Downtown but just over
Residential Intensification
directly in the core. As a direct result, King Street is bustli
during evenings and weekends. The Kitchener Growth Management P
Development Strategy, Downtown Kitchener Action Plan, Regional G
Places to Grow Act all place an emphasis on correcting this imba
residential development.
2) - high quality architecture has always been important to the Do
High Quality Urban Design
community. Developers and building owners, however, have not al
community expects. With greater emphasis being placed on urban
excellence and mixed use developments, the City can use financia
design. This is relevant for both major developments as well as
Plan, Urban Design Manual, Kitchener Economic Development Strate
Plan all promote high quality design.
3) - The Downtown Kitchener Action Plan and the
Attraction of New Retail and High Traffic Generators
Kitchener Economic Development Strategy both identify the need f
a grocery store and a movie theater. They also identify the nee
mix of retail shops Downtown.
4) - new construction that is LEED certified or Energy Star rated
Environmental Building Design
costs more than typical construction. Using incentives to assis
CityÈs Strategic Plan for the Environment, the Kitchener Strateg
Action Plan.
5) - to ensure that the companies emerging from the Communitech HU
Attract New Landing Pads
as other emerging startups, stay within Downtown Kitchener, land
This space is typically priced mid-range as a step between the s
rent. Upper storey space in the Downtown could be ideal for suc
creation of such space would support the Kitchener Economic Deve
Kitchener Action Plan.
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Other Programs Not Included in this Review
There are other financial incentives available within the Downto
Remediation Program and various heritage preservation incentives
newness of the Brownfield Remediation Program, it was not includ
of the heritage preservation incentives is to encourage the cons
whether or not new development is involved, they were also exclu
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Section
2
DowntownÈs Current Economic Context
Downtown Kitchener is clearly in transition. The catalyst proje
Investment Fund), coupled with private sector investments (ex: t
anticipation of the light rail transit system/transportation hub
from the private sector. However, Downtown Kitchener is still n
2,800 residential units in the planning and design stages for th
neighbourhoods, developers remain cautious. Many are waiting fo
and Arrow Lofts to test the price and absorption limits of Downt
office space in converted offices has received considerable pres
Block are still not fully leased. And while DowntownÈs office v
private sector office buildings have been built since 1992.
To better understand DowntownÈs current economic context, the fo
types of high density development - residential condos, resident
below are based on the availability of data, the geographic area
each type, a redevelopment scenario has been developed to illust
construction costs and sale prices.
Residential Condo Development
The following charts compare Downtown KitchenerÈs asking rates v
Average Condo Listing Prices (Recent Construction Projects Only)
Downtown KitchenerDowntown KitchenerUptown WaterlooMid-Town
Kaufman Lofts$324/sq.ftThe 42$403/sq.ftBelmont V Condos$267/sq.ft
Le Marche$229/sq.ftBPR Lofts (p.c.)$358/sq.ftBauer Lofts$362/sq.ft
Arrow Lofts$316/sq.ftBPR Lofts $369/sq.ft144 Park (p.c)$350/sq.ft
City Centre (p.c.)$343/sq.ft
One Victoria (p.c.)$362/sq.ft
$315/sq.ft$379/sq.ft$326/sq.ft
Note - (p.c.) stands for pre-construction pricing. All other p
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Scenario #1 - High Rise Residential Condominium
Number of Units = 300
Land Costs = $1.5 million/acre
Financing, Legal, Marketing & Sales Costs = 15% of construction
Design & Contingency = 15% of construction costs
The following graph illustrates the required per square foot sal
15% profit, thus making the project viable, without the aid of f
are willing to pay $315/square foot (using the average asking pr
could build a building at approximately $170/square foot and mak
high quality of urban design and architecture, using only high q
sustainable features, typically cost anywhere from $175 to $200/
square foot gap. For a 300-unit development, this would equate
$10.5 million.
Residential Condo Analysis
$375
$365
$362$362$362$362
$350
$331
$325
$304
$315$315$315$315
$300
$276
$275
$250
$146.60$162.89$179.18$200.00
Cost of Construction (per square foot)*
Sale Price (per square foot) Required to Achieve a 15% ProÐt Mar
Average Downtown Sale Price (per square foot)
Highest Downtown Sale Price (per square foot)
*Three of the prices shown are based on observed Canadian constr
development, according to Hanscomb Yardstick for Costing 2012.
and $179.18 is the highest observed cost.
It should be noted, however, that certain areas of the Downtown
prices than others. Most notably, projects near King and Victor
be able to command a higher sales price which help achieve a hig
to the proximity of marketable amenities such as the future tran
Square and the KPL Main Library. However, it should be noted th
these areas, thus this is an unproven assessment. On the other
nightlife or within the Market District may command lower sales
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Residential Rental Development
The following charts compare Downtown KitchenerÈs asking rates v
Monthly Average Apartment Rental Rates (Recent Construction Only
Downtown KitchenerDowntown KitchenerCentral NeighbourhoodsCentral NeighbourhoodsUptown
The Regency$1.25/sq.ftVictoria Park Place$1.05/sq.ftSeagram Lofts$1.22/sq.ft
Kaufman Lofts$2.29/sq.ftVictoria Towers$1.12/sq.ft$1.30/sq.ft
William Apartments
Iron Horse Towers$1.28/sq.ftWestmount Grand$2.11/sq.ft
Margaret Place$1.26/sq.ftRed Condos$1.47/sq.ft
$1.37/sq.ft
Betzner Brownstones
$1.77/sq.ft$1.22/sq.ft$1.53/sq.ft
Scenario #2 - High Rise Residential Rental
Number of Units = 300
Land Costs = $1.5 million/acre
Legal, Sales & Marketing Costs = 10% of construction costs
Design & Contingency = 15% of construction costs
Lending Rate = 4% amortized over 25 years
The following graphs illustrates the required per square foot sa
15% profit, thus making the project initially viable. However, this chart does not include ongoing
operating and maintenance costs. As such, the chart is simply f It
demonstrates that in order to build a high quality building betw
would have to achieve lease rates of approximately $1.65-$1.86/s plus any operating
costs. For a 750 square foot unit (ie: standard one bedroom), this e
$1,395 plus operating costs. Based on comparable rental rates i
which appears to be an anomaly) this could be difficult to achie
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Residential Rental Analysis - Long-Term Ownership
$2.50
$2.29$2.29$2.29$2.29
$1.86
$2.00
$1.68
$1.54
$1.41
$1.50
$1.22$1.22$1.22$1.22
$1.00
$0.50
$0
$146.6$162.89$179.18$200
Cost of Construction (per square foot)**
Lease Rate (per square foot) Required to Achieve a 15% ProÐt Mar
Lowest Asking Lease Rate (per square foot)
Average Asking Lease Rate (per square foot) in Downtown Kitchene
Highest Asking Lease Rage (per square foot) in Downtown Kitchene
Average Asking Lease Rate (per square foot) in the Central NÈhoo
* Does not include revenue required to fund ongoing operating an
**Three of the prices shown are based on observed Canadian const
residential development, according to Hanscomb Yardstick for C
cost, $162.89 is the average cost, and $179.18 is the highest
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Office Development
The following charts compare Downtown KitchenerÈs asking rates v
Office Rental Rates (excluding Common Area Maintenance fees) - 2
Downtown KitchenerDowntown KitchenerUptown WaterlooUptown WaterlooDowntown Cambridge (Galt)Downtown Cambridge (Galt)
Low$6.00/sq.ft
Average$11.67/sq.ftAverage$13.62/sq.ftAverage$9.52/sq.ft
High$21.95/sq.ft
Note - rates shown are for net rent only, and do not include and
The following chart compares the average asking lease rates for
cities and their core areas since 2004. While Downtown Kitchene
almost $2/square foot below Uptown Waterloo and more than $3/squ
average.
Average Asking Lease Rate (Office): 2004 to Q2-2012
$16
$14
$13
$11.67
$11.45
$11.26
$11.07
$11
$10.52
$10.51
$10.30
$9.88
$9.46
$10
$8
200420052006200720082009201020112012
Year
Downtown KitchenerKitchenerUptown WaterlooWaterloo
Downtown GaltCambridge
Note - rates shown are for net rent only, and do not include and
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Scenario #3 - Office Development
Total Square Feet = 200,000
Leasable Square Feet = 180,000
Land Costs = $1.5 million/acre
Marketing, Sales & Legal Costs = 7% of construction costs
Design & Contingency = 15% of construction costs
Interest Rate = 4% amortized over 25 years
The following graphs illustrates the required per square foot sa
15% profit, thus making the project viable. For example, to bui
developer would need to rent space at $26.68 per square foot. B
and architecture, using only high quality materials, with the in
anywhere from $220 to $242/square foot. Such buildings would re
$30.93/square foot respectively. These rates are far above the
analysis explains why no new office towers are being built in Wa
for a single client or surrounded by surface parking.
Office Development Analysis - Long-Term Ownership
$35.00
$30.93
$28.77
$28.75
$26.68
$22.50
$21.95$21.95$21.95
$16.25
$10.00
$11.67$11.67$11.67
$198.16$220.18$242.20
Cost of Construction (per square foot)**
Lease Rate (per square foot) Required to Achieve 15% ProÐt Margi
Average Asking Lease Rate (per square foot) in Downtown Kitchene
Highest Asking Lease Rage (per square foot) in Downtown Kitchene
*assumes that all space is leased and that all operating costs a
**Three of the prices shown are based on observed Canadian const
according to Hanscomb Yardstick for Costing 2012. $198.16 is t
$242.20 is the highest observed cost.
If an office building was built for the sole purpose of being so
Trust Fund), the building would need to achieve a capitalization
to purchase the building) of at least 5%. In this case, an offi
achieve lease rates between $21.13 and $24.50 per square foot.
achievable. However, it should be noted that these rates are st
would be risky to build such a building on speculation without h
guarantee that a holding company would purchase the building.
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Office Development Analysis - Short-Term Redevelopment
$30.00
$24.50
$25.00
$22.80
$21.13
$21.95$21.95$21.95
$20.00
$15.00
$11.67$11.67$11.67
$10.00
$198.16$220.18$242.20
Cost of Construction (per square foot)**
Lease Rate (per square foot, excluding CAM) Required to Achieve
Average Asking Lease Rate (per square foot) in Downtown Kitchene
Highest Asking Lease Rage (per square foot) in Downtown Kitchene
*assumes that all space is leased and that all operating costs a
**Three of the prices shown are based on observed Canadian const
development, according to Hanscomb Yardstick for Costing 2012.
average cost, and $242.20 is the highest observed cost.
Conclusions
Downtown Kitchener is still at a competitive disadvantage when a
current market rates for both office space and residential condo
relative to Uptown Waterloo and Midtown/Belmont Village. If Kit
redevelopment to the core, particularly residential condominiums
compensate for lower market rates.
As a result, and based on the three redevelopment scenarios, it
in a position to attract new high quality development without th
market increase in sale prices and lease rates. There are areas
achieving these prices than others, particularly those areas clo
and the future transportation hub. Similarly, it is possible th
transit stops (ex: Charles & Cedar, Duke and Ontario, etc.) may
these prices. However, only once actual projects are completed
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Evaluation of Existing Downtown
Section
3
Financial Incentive Programs
Each incentive program provides a differing level of financial s
comparison for the four programs intended to support major redev
Financial Incentive Program Comparison (using 2012 rates)
Residential Residential Residential Loft OfficeOffice Loft
CondoApartmentConv. CondoConversion
3-Year Tax Exemption$1,229/unit$1,000/unit$1,000-1,229/unit*$275/1,000 sq.ft$1,050/1,000 sq.ft
Planning & Building Permit $844/unit$844/unit$278/unit$2,134/$427/1,000 sq.ft
Fee Rebate1,000 sq.ft
Parkland Dedication Fee $1,850/unit$1,850/unit$1,850/unit$172/1,000 sq.ft$172/1,000 sq.ft
Waiver
t
Development Charge Waiver$12,177/unit$12,177/unit$12,177/unit**$1,670/1,000 sq.ft$1,670/1,000 sq.ft**
TOTAL$16,100/unit$15,871/unit$3,128-$15,534/$4,251/1,000 sq.ft$3,319/1,000 sq.ft
unit***
*$1,000 is for a rental unit; $1,275 is for a condominium unit.
** Only applies to new floorspace, not converted space.
*** Low range represents rental units built within converted spaaiver)
t
Development Charge Waiver includes the Regional waiver. The Ci
Note - ÅunitÆ calculations are based on a 650 square foot unit v
Evaluation Criteria
Each of the five existing programs, as well as the discontinued
evaluated based on the following six criteria:
Is the program financially relevant (ie: does it provide a sign
1.
redevelopment or enable the City to negotiate for performance ob
Is the program user friendly to the applicant, and not a cumber
2.
Does the program allow the City to use discretion on the types
3.
Does the program allow the City to impose performance objective
4.
Does the program provide a predictable and controllable financi
5.
accurately budget for and limit the amount of funding provided i
Can the program be administered without requiring significant s
6.
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Program-by-Program Evaluation
City staff reviewed each of the existing programs and offer the
information on each program, see the appendices in Section 7.
3-Year Tax Exemption (1997 Ã present)
Projects which result in an increase to property taxes are eligi
a period of three years, subject to the availability of funding.
The financial value of this program is very modest. It equates
construction or $2 per square foot for residential construction.
break whether a project proceeds. The City could impose require
only high quality projects receive the exemption. Presently, ho
exact value of the exemption is challenging and cannot be determ
exemptions tend to be unattractive to developers of condominium
purchasers, not the builder. Due to the nature of this incentiv
considerable staff time. However, it appears that no projects h
Based on the foregoing, staff do not see sufficient value in con
Planning Application and Building Permit Fee Rebates (1997 Ã pre
Any completed construction project in the core is eligible to re
Funding is limited and provided on a first-come first-serve basi
For new office construction, this program can provide significan
square foot office building, the incentive could exceed $425,000
program is very modest. For small businesses and retailers, th
relative to major new construction projects, is a significant mo
interior enhancements and adding new patios.
The City could impose requirements or performance standards to e
the exemption. Presently, however, all projects are eligible.
However, given the first-come first-serve nature of the funding
that any project will receive funding. For example, one major p
meaning no other projects completed in the same calendar year co
developers are given little certainty that this program will be
Given the difficulty in guaranteeing available funding, staff su
the funding toward existing incentive programs, such as the Faca
suggest maintaining a scaled back version of this program target
improvements.
Exemptions from Parkland Dedication Fees (1995 Ã present)
Municipalities can, as part of most new developments, require ei
equivalent cash-in-lieu payment.
For non-residential developments, a municipality can acquire 2%
equivalent of 2% of the value of the land prior to development.
to the developer.
For residential developments, the municipality can acquire 5% of
value of 1 hectare of land for every 300 units. In most cases, t
as the park space would be relatively insignificant or has the p
However, the cash-in-lieu rate for redevelopment projects has th
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
particularly where land values are high. At a land cost of $1.5
required to pay $3.7 million in parkland fees (or in excess of $
project, the City opted to impose a lesser rate of 0.15 hectares
is the only area of Kitchener where developers are exempt from p
While exempting parkland dedication fees does not result in a di
revenue which limits the CityÈs ability to acquire or purchase p
not have any ability to impose requirements or performance stand
projects would be exempt. No administration of this program is
Based on the CityÈs inability to limit this exemption only for h
discontinuing this program. Staff suggest that if this exemption
subject to a new cash-in-lieu rate of 0.15 hectares for every 30
the Planning Act.
Exemptions from Development Charges (1999 Ã present)
Any project within the Downtown boundary, adding new commercial
units, are currently exempt from paying development charges (DC)
the greatest financial impact for a development. Historically,
in the downtown, the Region of Waterloo has done the same. For
residential developers over $12,000 per unit, of which the CityÈ
noted that, since DC charges were reinstated in Uptown Waterloo
become a much more attractive location for these types of redeve
There are two methods of foregoing development charges Downtown.
Kitchener was excluded from the Development Charges Bylaw, thus
development Downtown. The Ådowntown portionÆ of any growth rela
through non-DC sources in the CityÈs capital budget (e.g., capit
From 2009-2013, the Downtown was not excluded from the Bylaw. U
are still exempt from the fee, but the City back funds the Devel
exemptions, resulting in a levy impact to the tax base. For a 1
example, the City will have to back fund $306,600, while the reg
resulting in an incentive worth $1,217,700. As every project re
more difficult to budget for than the previous approach. For ex
year, the City would have to find over $1.5 million to fund the
approach provided much greater financial certainty as the split
be established through the background study and then be provided
budget and forecast.
When the City of Waterloo discontinued its DC exemption for Upto
building permit applications prior to the sunset date. This res
tax base. By returning to the pre-2009 approach, the City could
example, and not be at risk of having to back fund an influx of
growth-related projects would be established up front and built
While DC exemptions provide great financial impact for a develop
discretion over who receives the exemption. However, if the Cit
Official Plan, the City could hold DC exempt projects to the hig
policies would provide the basis for the City to refuse a site p
insufficient.
Based on the importance of the DC exemption, yet recognizing the
2009-2013 approach, staff recommend using the pre-2009 approach
addition, staff recommend incorporating special policies in the
design.
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Faade Improvement Grant Program (2009-2013)
Building and business owners can receive up to $10,000 per store
buildings with multiple storefronts. The grant cannot exceed 50
2012, 34 projects were approved covering 48 facades. If all app
will stimulate more than $1.4 million in construction value, of
For most of the applicants, without the facade grant they would
remainder, the grant enabled them to use higher quality of mater
scope and scale of work. The incentive acts as a key tool for
efficient and simple for both staff and applicants, yet the City
funding. All projects must generally support the King Street Fa
approved is limited to the amount of funding available, giving t
Based on the popularity of the program, the positive results pro
approach, staff recommend continuing this program. Should the p
potential projects which would have more than three storefronts
the need for the $30,000 per property cap in order to facilitate
buildings.
However, almost all of the initial funding set aside for this pr
(although not all completed) projects. Staff recommend finding
program.
Upper-Storey Renovation Program (2005-2010)
The Upper-Storey Renovation Program was targeted at vacant or di
(primarily on King and Queen Streets). Applicants could receive
was in the form of a loan, and 50% in the form of a forgivable l
square feet or greater could be eligible. Six projects were suc
The program produced less than expected results. This was due t
difficult to administer and cumbersome for applicants. This is
loans (credit checks, legal documentation, etc.). Low interest
enticing. The Downtown rental market was soft and typical renta
storey spaces require extensive work to where the $50,000 grant
As a result, the City discontinued the program in 2010.
Overall Evaluation
1. Financially 2. User 3. Allows 4. Impose 5. Financially 6. Easy to
RelevantFriendlyDiscretionObjectivesPredictableAdminister
3-Year Tax
NoNoNo*No*NoNo
Exemption
Planning & Building
Partially**YesNo*No*Yes/No***Yes
Permit Fee Rebate
Parkland Dedication
Partially**YesNoNoNoYes
Fee Exemption
Development Charge
YesYesNoYesYes/No****Yes
Exemption
Facade Grant
YesYesYesYesYesYes
Program
Upper-Storey
YesNoYesYesYesNo
Renovation Program
*Programs are not currently set up to allow discretion or impose
** The program is financially relevant only for certain uses.
*** The Planning & Building Permit Fee Rebate is financially pre
there is no guarantee that funding will be available for their p
**** The DC exemption is financially predictable if the Downtown
the program is not financially predictable.
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DOWNTOWN FINANCIAL INCENTIVE REVIEW PAGE
Based on the foregoing, only the Facade Grant Program satisfies
popularity and effectiveness of the program, staff recommend con
subject to the availability of funding.
For all other financial incentive programs, it is clear that the
44444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444A
All options for modifying the current incentive package are iden
Note - staff recommend that prior to discontinuing any program,
established for each
.
Additional Program Worth Considering - Landing Pad Grant Program
Landing pads are an essential component of the CityÈs ÅStart Up
companies to locate once they have graduated from tech incubator
Accelerator Centre, or outgrown co-working spaces like Treehaus
encourage new Landing Pads (see public policy objective #5 in se
reserve account for the purposes of providing grants for such pr
aside $200,000 and offer up to 5 grants, totaling $40,000 each,
operate similar to the Facade Grant Program. Grant money would
construction costs, and could be applied to interior and exterio
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CityÈs Financial Capacity to Fund
Section
4
Financial Incentives
The following are the funds currently available, or budgeted for
Economic Development Investment Fund
Development Charge Exemption = $1,494,000*
Upper-Storey Program = $919,000
Capital Budget
Planning & Building Permit Fee Rebate Program:
Current Balance = $878,000*
Budgeted 2013 = $203,000*
Budgeted 2014 = $149,000
Budgeted 2015-2019 = $92,000/year
Capital Reserve
Downtown Facade Grant Program = $30,000 (not yet allocated to ap
Total
All totaled, in 2013, the City would have only approximately $3.
portion of this funding could be spent during the sunset period
* If the City were to establish sunset clauses for these program
under development or in the planning phases.
Additional Funding
Presently, no additional funding has been built into the CityÈs
establish an ongoing funding source through the capital budget,
would provide $1 million of annual funding (for example).
Conclusion
The current incentive package includes two types of programs: th
Grant Program, Building Permit Rebates and Upper Storey Renovati
ended (Development Charge exemption, Waiver of Parkland Dedicati
Exemption). Programs with upset funding limits are typically su
Council can limit or increase the amount of funding as it sees f
open-ended programs, most notably the Development Charge exempti
certainty. Simply put, the City no longer has the financial res
programs without the potential imposition of a significant incre
longer continue to offer open-ended financial incentives with no
municipal budget.
However, it its clear from the analysis in Section 2, that there
incentive in order to stimulate redevelopment. Using the pre-20
City to offer incentives without creating a greate deal of uncer
tax levy. Doing so may also allow the City to repurpose funds f
funding for the Facade Grant Program.
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Section
Options for Incentive Programs Moving
Options for Incentive Programs Moving
5
Forward
The following provides a series of incentive package options the
Based on the success, importance and support from the business c
Remediation Program and the Downtown Facade Grant Program, all o
of these programs:
Option 1 - Status Quo
This option would extend all existing programs through to 2019.
from development charges and park land dedication fees, would be
exemption, while being eligible to receive rebates for planning
Discontinue: None
Continue: All
New Incentives: None
Pros: an attractive package of incentives for the development in
most development activity, thus generate the greatest potential
Cons: the City would have limited control of the quality of proj
funding projects that do not require financial support. This op
increases to the tax base. There is no ongoing funding source b
Estimated Cost to the City: in excess of $4.5 million if all pro
completed by 2019, plus a loss of approximately $2 million in po
Option 2 (Preferred) - Modify Development Charge Exemptions and
This option would see the City exclude the Downtown from the nex
mid-2014) and fund any growth related capital works in the Downt
would be implemented in concert with new policies in the Officia
recipients of this development charge exemption to high urban de
programs would be discontinued or modified in some manner. The
for Planning & Building Permit Fee rebates would be redirected t
annual basis. The Planning & Building Permit Fee rebate program
minor improvements. EDIF funds previously allocated to the Uppe
used to fund a new Landing Pad Grant Program.
Discontinue: Parkland Dedication Fee Exemption, 3-Year Tax Exemp
Program
Continue: Facade Grant Program, Brownfield Remediation Program
Modify: Planning & Building Permit Fee Rebates
New Incentives: Landing Pad Grant Program
Pros: this package continues the Development Charges Exemption w
impacts on the municipalityÈs budget. It also enables the conti
establishment of a new Land Pad Grant Program.
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Cons: the City would not have full control of the quality of pro
would be subject to Site Plan Control.
Estimated Cost to the City: the capital costs related to downtow
upcoming DC Background Study to be completed by mid-2014. Throu
Council as to whether or not existing capital budgets provide su
related to growth in the Downtown.
Option 3 - One Consolidated Grant Contingent Upon High Quality U
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Only a limited number of projects would be approved each year, a
approach, whereby only the best designed projects would receive
Discontinue: Development Charge Exemption, Parkland Dedication F
Planning & Building Permit Waiver, Upper-Storey Renovation Progr
Continue: Facade Grant, Brownfield Remediation Program
New Incentives: Urban Design Development Grant
Pros: this option directly supports larger public policy objecti
architecture in the Downtown. The City would have control over
regardless of use, would be eligible. This option provides grea
Cons: only a small number of projects would receive funding. Pr
but not the best design proposal in a given year, would not rece
may delay a project, or cause the developer to push it into the
subjectiveness would be used in the selection process.
Estimated Cost to the City: would be based on the availability o
to stimulate investment, the City would likely need to generate
program.
Option 4 - Replace Incentive Programs with Strategic Municipal I
In an effort to increase purchase prices and absorption rates, i
City could opt to fund enhancement projects instead of incentive
normally directed to incentives could be directed to beautificat
catalyst partnerships, etc.
Discontinue: Development Charge Exemption, Parkland Dedication F
Planning & Building Permit Waiver, Upper-Storey Renovation Progr
Continue: Facade Grant, Brownfield Remediation Program
New Incentives: none
Pros: this option provides greater financial certainty for the C
support the marketability of City owned lands.
Cons: redevelopment projects would likely be delayed until such
point where projects are feasible entirely based on purchase pri
would occur. Realistically, it would not occur until some time
have less control over the type and design quality of redevelopm
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Estimated Cost to the City: new projects would be based on the a
funds currently attributed to financial incentives would have to
budget.
Option 5 - Discontinue all Incentive Programs
The City could opt to eliminate all Downtown financial incentive
Discontinue: Development Charge Exemption, Parkland Dedication F
Planning & Building Permit Waiver, Upper-Storey Renovation Progr
Continue: Facade Grant, Brownfield Remediation Program
New Incentives: none
Pros: funds used to support financial incentives could be redire
overall budget savings.
Cons: based on the research contained within this study, redevel
until such time as the Downtown market reaches the point where p
purchase prices alone. Certain redevelopment projects could be
less control over the design quality of redevelopment projects i
ability to achieve public policy objectives such as growth manag
Estimated Cost to the City: this approach would result in a savi
Implications of the Regional Development Charge Exemption
Historically, where a local municipality has offered a developme
followed suit. Given the value of the Regional exemption (ex: $
the total development charge) it is imperative that the Region a
RegionÈs support, and based on the analysis of section 2, it is
delayed until market rates increase to a point where each projec
value of incentive.
Treatment of Parkland Dedication Fee Exemption
A number of the options listed above suggest eliminating the Par
as discussed in section 3, imposing the highest cash-in-lieu fee
counteracting the value of the incentives being proposed. As s
waiver occur in concert with a new Council policy that establish
Downtown (and potentially other appropriate reurbanization areas
City would still retain the option to obtain 5% of the land unde
Sunset for Discontinued Programs
Where any programs are recommended for discontinuation, staff su
date to each program, allowing those developments that are proce
package, to complete their projects and claim their incentives.
DC Bylaw expected in mid-2014.
It is also imperative for the City to advise the development ind
intended to be offered on a perpetual basis. They are intended
core only when market rates are not strong enough to enable fina
such as the development charge exemption, could be discontinued
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Expansion of the Downtown Boundary
Over the past few years, a number of developers have asked if th
Downtown boundary to allow their projects to be eligible for Dow
boundary aligns with the Urban Growth Centre Boundary of the Cit
Strategies. Upon review, staff have determined that there is no
where redevelopment opportunities do not exist on the opposite s
opportunities on King East extend past Ottawa Street, redevelopm
Victoria Street north extend to the City limits, redevelopment o
expressway, and redevelopment opportunities in Mill-Courtland ex
Such expansions could add significant additional strain and unpr
if the expansion is for the purpose of extending the development
boundaries using option 3 would provide greater financial certai
the incentive program. Redevelopment projects would be scattered
as opposed to concentrated Downtown.
Based on the foregoing, staff recommend against expanding the bo
harmonized boundary of both the Urban Growth Centre and the Down
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Section
6
Preliminary Recommendations
Based on all of the analysis contained within this discussion pa
financial incentive package, much of which was established in 19
the CityÈs objectives and interests. Most specifically:
i)the set of programs do not provide the City with the ability to
objectives (such as high quality urban design, sustainable desig
ii) the set of programs do not provide the City with predictable fi
As such, staff recommend exploring the following changes to the
a)Through the development of the next Development Charges Bylaw, e
the bylaw, resulting in no development charges being applied Dow
b)Work with Region of Waterloo staff to strongly encourage the Reg
development charge exemption;
c)Scale back the Planning & Building Permit Fee Rebates to target
3-year Tax Exemption, subject to a phasing-out process, with inp
d)Modify the Parkland Dedication Waiver to establish a reurbanizat
300 units for the Downtown, subject to a phasing-out process, wi
e)Extend the Facade Grant Program beyond 2013 and consider options
within the Capital Budget, such as reassigning the budget alloca
Fee Rebates, starting in 2014. Consider allowing more than $30,
more than 3 separate storefronts;
f)Develop a grant program for Landing Pads geared towards start-up
Grant Program, using the remaining funds from the Upper-Storey R
and,
g)Establish clear Official Plan policies that allow the City to ho
incentive to the highest possible standard in terms of urban des
Staff believe that these changes support the CityÈs policy objec
provide greater financial predictability and should reduce the a
numerous programs. Above all, they continue to provide a necess
redevelopment in Downtown Kitchener, until such time as purchase
where the City no longer needs to support such projects.
Looking Forward
Just as todayÈs context is very different than 1995, the post-LR
such, staff anticipate conducting a similar review of Downtown F
operational. At such point, staff should have a better understa
economic viability of redevelopment projects. There is a strong
the development charge exemptions, may no longer be necessary to
profitability.
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Section
7
Appendices
3-Year Tax Exemption (1997 Ã present)
1.
Number of Applications: None
Total Cost to the City: N/A
Funding Source: funded through the CityÈs Capital Budget
Planning Application and Building Permit Fee Rebates (2006 Ã pre
2.
Number of Applications: 21
Total Cost to the City: $403,244.17
Funding Source: funded through the CityÈs Capital Budget
Exemptions from Parkland Dedication Fees (1995 Ã present)
3.
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As a result, there is no direct impact to the tax base. However
otherwise would be placed in the Park Dedication Trust Fund.
Faade Improvement Loan/Grant Program (1997 Ã 2009)
4.
Value of Incentive: interest free loan of $15,000 per storefront
interior renovations). A maximum of $45,000 could be given to a
was forgiven, acting as a grant.
Number of Applications:
ApplicationsValue of Loans AdvancedValue of Loans Forgiven
1997-2005134$2,248,000$422,000
2006-200813$435,000$62,250
Funding Source: Capital Account
Exemptions from Development Charges (1999 Ã present)
5.
Value of exemptions since 2001:
YearTotal ExemptionYearTotal Exemption
2001$472,937.702006$223,261.58
2002$259,357.832007$200,215.56
2003$0.002008$205,771.68
2004$19,536.002009$282,979.24
2005$56,626.952010$24,619.44
2011$419,986.41
Total$2,165,292.39
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Upper-Storey Renovation Program (2005-2010)
6.
Number of Approved Applications: 6
Number of Residential Units Renovated: 26
Funding Source: EDIF
Total Construction Value: $489,250
Value of Loans Forgiven: $200,500.
Faade Grant Program (2009-2012)
7.
Number of Approved Applications: 34
Number of Storefronts/Facades/Signs Renovated: 48
Funding Source: Capital Reserve
Total Construction Value to Date: $1,439,000
Value of Grants Paid to Date: $390,000
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