HomeMy WebLinkAboutCAO-14-030 - Brownfield Remediation Program Application - 83 Elmsdale Dr Staff Report
K jTC'H _Ni-, CA0 Office www.kitchener ca
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: June 23, 2014
SUBMITTED BY: Brian Bennett, Manager, Business Development, 519-741-2200 X 7230
PREPARED BY: Rob Morgan, Capital Investment Advisor, 519-741-2200 X7734
WARD (S) INVOLVED: Ward(s) 6
DATE OF REPORT: May 20,2014
REPORT NO.: CAO- 014-030
SUBJECT: Brownfield Remediation Program Application
83 Elmsdale Drive
RECOMMENDATION:
1. That the City of Kitchener approve the Brownfield Remediation Program Application, received from
Novacore Communities Corporation(the "Purchaser") or a related corporation dated October 2013 . In
exchange for a completed and filed Record of Site Condition for the property, the City of Kitchener will
provide the Purchaser upon becoming the owner a grant in the form of an annual rebate on City taxes in
an amount equal to 100% of the City Tax Increment; where the City Tax Increment is defined as the
difference between the City portion of real property taxes for the 2013 Taxation Year and the new City
portion of real property taxes levied as a result of a new assessment by the Municipal Property
Assessment Corporation (MPAC)following completion of the project, as compensation for the
remediation of the above stated lands.The annual City property tax grant is estimated to be
$429,509.00, payable for six years with $408,149 being paid on the seventh and final year following re-
assessment by MPAC.
2. That the Region of Waterloo Brownfield Coordinator be advised of City Council's decision regarding this
Application.
3. That the Mayor and Clerk be authorized to execute an Agreement with the Region of Waterloo and
Novacore Communities Corporation or a related company.
BACKGROUND:
In October 2013, the City of Kitchener and Region of Waterloo received a joint Tax Increment Grant (TIG)
application from the Novacore Communities Corporation in regard to the remediation and redevelopment of
the property municipally known as 83 Elmsdale Drive in Kitchener(See Map Attachment 1). The 4.89 hectare
property, which includes frontage on Ottawa Street South and Elmsdale Drive, is currently owned by the City of
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Kitchener and has a conditional Agreement of Purchase and Sale with Novacore Communities Corporation.
Contamination, including landfill material, zinc, mercury and dichlorobenzene has been identified onsite.
Conditional approval of the joint TIG by the City of Kitchener and Region of Waterloo is required to facilitate the
sale of 83 Elmsdale Drive, the remediation of the property, as well as the development of 225 residential
apartment units, 135 retirement specific units and 9,197 square metres (99,000 square feet) of mixed use
commercial and office space.
REPORT:
Contamination and Remediation
The Environmental Consultants for this project are Maddalena Environmental Inc. Referring to the Remedial
Action Plan dated February 28, 2014, numerous test pits, bore holes and trenches were dug onsite allowing for
the delineation of the areal extent, maximum depth of waste as well as impacted soils on-site. Soils on the site
were found to exceed Ministry of the Environment standards for zinc, mercury, dichlorbenzine and PHC's.There
is also an extensive quantity of landfill material largely consisting of industrial and construction/demolition
waste.
Eligible Remediation Cost
The applicant has submitted estimated environmental remediation costs for the site of$10,430,760. This
amount, plus a 10%allowance for indirect costs afforded under the joint TIG program ($1,043,076), less
assistance pending under the Regional Development Charge Exemption ($3,709,530) results in a maximum
eligible joint TIG of$7,764,306.The TIG would be cost-shared between the Region and the City of Kitchener with
grant proportions determined by each municipality's share of the municipal taxes levied on the property in the
year the application was submitted (2013)with approximately 61.6% (maximum of$4,779,101) being provided
by the Region and the remaining 38.4% (maximum of$2,985,206) provided by the City of Kitchener. The annual
payments, which would last an estimated seven years, would not start until after the property is fully
remediated, redeveloped and ultimately reassessed by the Municipal Property Assessment Corporation (MPAC),
likely not before 2016(Table 1).
As a condition of final approval of eligible costs, invoices must be submitted by the applicant and must be
approved for eligibility by City of Kitchener and Regional staff.
Ownership of the Land
The lands at 83 Elmsdale Drive are currently owned by the City of Kitchener, which has entered into a
conditional Agreement of Purchase and Sale with Novacore. The purchase by Novacore is conditional upon
receiving a TIG from both the City of Kitchener and the Region of Waterloo. While one of the standard eligibility
criteria for the joint TIG program is that the applicant must be the registered owner of the site or an assignee of
the owner, the City of Kitchener and Novacore have jointly submitted the TIG application in anticipation of the
purchase. Conditional approval of the joint TIG by the City and Region would facilitate the final sale of 83
Elmsdale Drive, the remediation of the property, as well as the development of residential apartments units and
commercial and office space.
Assuming the approval of the TIG,as well as completion of the Official Plan Amendment and Zone Change, it is
expected that the purchase and sale transaction would be completed by August 2014. The property at 83
Elmsdale Drive, will be reassessed as a taxable property once the sale is completed. While this could have some
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impact on the pre-remediation taxes and calculation of the tax increment (and hence the payment schedule), it
will not impact the Net maximum eligible TIG.
Existing Assessment and Taxes
The total 2013 approximate Commercial Assessment for the land was$2,204,000. Based on this value the total
property taxes would be$43,838.00 split as follows:
City of Kitchener $16,854.00
Region $26,983.00
The City is exempt from property taxes on this property however, MPAC assigns an assessment value for
municipality owned properties to allow for market value comparables to other taxable properties.
Projected Assessment and Taxes
The development will provide 225 residential apartment units, 135 retirement specific units and 9,197 square
metres (99,000 square feet) of mixed use commercial and office space. Based on this, the post-project
assessment value has been estimated at approximately$59, 600,000.
Using the 2013 Tax Rates, the projected annual Municipal Taxes (Region +City)following full completion of the
project would be$1,160,961.00, split as follows:
City of Kitchener$446,364.00
Region $714,597.00
Based upon this projection,the City's Annual Tax Increment (i.e. the difference between the existing City tax
level and the future City tax level) is estimated at$429,509.00 ($446,364.04-$16,854.87).
The Regional Tax Increment is estimated at$687,614 ($714,597.05-$26,983.44).
Table 1 identifies the preliminary estimated payment period.The final joint TIG grant payment schedule will not
be confirmed until the actual remediation costs are reviewed and the MPAC assessment is received following
the redevelopment of the property. Regardless of the actual remediation costs, the City's share of the TIG would
be capped at$2,985,203.
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Table 1: Estimated TIG Payment Schedule for 83 Elmsdale Drive,Kitchener
Year City Region Total TIG
1 $429,509 $687,614 $1,117,123
2 $429,509 $687,614 $1,117,123
3 $429,509 $687,614 $1,117,123
4 $429,509 $687,614 $1,117,123
5 $429,509 $687,614 $1,117,123
6 $429,509 $687,614 $1,117,123
7 $408,149 $653,419 $1,061,568
8 - - -
9 - - -
10 - - -
Total TIG* $2,985,203 $4,779,103 $7,764,306
* Rounded to the nearest dollar
Sequence of Financial Incentives
The Region — City Brownfield Financial Incentive Program provides the development industry 3 funding
instruments which work in the following sequence.
First, the Region provides a 50%grant(up to $40,000)for a Phase 2 Environmental Site Assessment.
Second, the Region provides an exemption in the applicable Regional Development Charge equivalent to (but
not exceeding)the "Eligible Remediation Cost".
Lastly, the Region and the City jointly provide a Tax Incremental Grant (TIG) on any remaining "Eligible
Remediation Cost" which has not been funded by Regional Development Charge exemptions.
This development has requested the Regional Development Charge Exemption and the joint TIG listed above.
Staff estimates that the Regional Development Charges exemption for the proposed development(using current
DC rates) is $3,709,530.00.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
This project implements our Community Vision and the Citizens'Vision for the Environment:
"Together, we will build an innovative, caring and vibrant Kitchener with safe and thriving neighbourhoods";
"Our shared vision is for Kitchener to be a community that focusses significant energy and resources on becoming
more environmentally friendly through investments in things like bike trails, improved transit systems, tougher
environmental bylaws and stricter growth management policies that limit sprawl."
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This project is in keeping with the following Environmental Strategic Direction:
"Endorse and implement the proposed Environmental Remediation Strategy."
FINANCIAL IMPLICATIONS:
The approval of this application will obligate The City of Kitchener to provide an annual municipal property tax
rebate estimated to be$429,509.00 per year for the first 6 years upon reassessment by MPAC and $408,149.00
for the seventh and final year.
COMMUNITY ENGAGEMENT:
This Application has not been circulated to the public. Staff would note that this approval applies only to the City
of Kitchener portion of the proposed Tax Incremental Grant.The Region of Waterloo Council will consider its
portion of this application at a future date.
CONCLUSION:
Regional Staff and The Brownfield Steering Committee, consisting of the City's Capital Investment Advisor,
Director of Revenue, City Solicitor, and Director of Planning, reviewed the application and are satisfied that the
application meets the eligibility and application requirements. Staff support acceptance within the terms and
conditions of the Region of Waterloo- Kitchener Brownfield Remediation Program.
ACKNOWLEDGED BY: Jeff Willmer, CAO
Attachments:
Attachment 1 —Site Map
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Attachment 1
msdale
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