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Home My WebLink AboutFCS-16-077 - 2015 Development Charge Reserve Fund REPORT TO: Finance and Corporate Services DATE OF MEETING: May 30, 2016 SUBMITTED BY: Dan Chapman, Deputy CAO and City Treasurer, 519-741-2200 ext. 7347 PREPARED BY: Ruth-Anne Goetz, Senior Financial Analyst, 519-741-2200 ext. 7335 WARD(S) INVOLVED: All DATE OF REPORT: April 21, 2016 REPORT NO.: FCS-16-077 SUBJECT: 2015 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.The Act was amended in 2015, but still requires annual reporting to Council. In addition to the information that has historically been provided to Council, the following required information: Table D: 2015 Expenses This table was expanded to detail all of the non-development funding sources used to fund the non-growth portion of capital costs Body of the report - A statement has been added to say that the City is in compliance with section 59.1 (1), which states that no additional charges related to development has been imposed by the City REPORT: Summary of Development Charges Legislation: The Act provides the authority and process for the imposition and collection of development charges. Development charges (DCs) 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: *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. IF1 - 1 CategoryServices within Category Discounted ServicesGeneral Government Studies Parking Indoor Recreation Outdoor Recreation Cemeteries Library Non-DiscountedRoads and Related ServicesSanitary Servicing Watermains Storm/Watercourse Intensification Allowance Engineering Studies Public Works Fire A summary of the DC Reserve Fund by Category of Service is found in 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 Act stipulates that the DC rates may be indexed, effective January 1 of each year that the by-law remains in effect. As such, the City of Kitchener indexes the DC rates based on the non- residential construction price index, as provided by Statistics Canada. The 2015 DC rates are set out in Table B. Revenue DC collections in 2015 total $10.8M, a small decrease from the 2014 collections of $10.9M. Of the total revenue, $9.8M was attributable to residential development and $1.0M was for non- residential development. When the 2014 by-law was passed, Council determined that industrial developments would be subject to a 50% reduction in their development charge fees, from July 1, 2014 to March 1, 2019. This reduction is subsidized by contributions from the tax base, as well as the Water, Sanitary and Storm Water Utilities, as per report FCS-14-088. In 2015, $0.5M of funding was provided to the DC reserve in relation to the industrial exemption. Expenses Net DC expenses to December 31, 2015 total $16.4M. Detailed lists are included in the DC Reserve Fund Transactions in Tables C, D and E. Since 2004, different rates have been charged 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 background study. IF1 - 2 Reserve Fund Balances The DC Reserve Fund at December 31, 2015 was in a deficit position of $2.3M compared to a surplus position of $2.7M at the end of 2014. 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 the new background study was completed, the reserve balances in each service were included in the development charge rate calculation, therefore over time, it is anticipated that the deficits will be recovered and the surpluses utilized. Exemptions DC exemptions in 2015 total $0.9M compared to $2.9M in 2014. Of the total exemptions, $0.4M was attributable to residential development and $0.5M was for non-residential development. Major exemptions are the redevelopment allowance (if a redevelopment occurs and proof of demolition is provided, the development charge applicable shall be reduced by an allowance that equals the number and types of residential units and the non-residential gross floor area of the former development, at the rates applicable at the time the first building permit for the re- development is issued), additional dwelling units in existing residential exemption, and exemptions for municipal use. A summary of major exemptions is included in Table F. Credit for Service Agreements 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, 2015, credits of $4.7M were outstanding compared to $4.9M at the end of 2014.Refer to Table G for more details. By-law A new DC by-law came into effect July 1, 2014 for a term of no longer than five years. No Additional levies The City of Kitchener has not imposed, directly or indirectly, a charge related to a development or a requirement to construct a service related to a development, except as permitted by the Act or another Act. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: through the delivery of core service. FINANCIAL IMPLICATIONS: Financial implications are discussed above and detailed in the attached appendices. IF1 - 3 COMMUNITY ENGAGEMENT: INFORM advance of the council / committee meeting. In addition, a copy of this report will be Association. ATTACHMENTS: Table A: Development Charges Reserve Fund Summary by Category of Services Table B: Development Charge Rates Table C: 2015 Transactions Table D: 2015 Expenses Table E: Reserve Fund Transactions by Service Table F: 2015 Exemptions Table G: Credit for Service Agreements ACKNOWLEDGED BY: Dan Chapman, Deputy CAO and Treasurer IF1 - 4 IF1 - 5 TABLE B DEVELOPMENT CHARGE RATES CentralSuburban Residential DevelopmentNeighbourhoodsAreas Single detached or semi-detached dwelling$5,518$10,592/ dwelling unit Townhouse or street townhouse dwelling$3,910$7,503/ dwelling unit Multiple or duplex dwelling$3,045$5,846/ dwelling unit Lodging House$1,678$3,221/ dwelling unit Non-Residential Development** Gross floor area of building$16.48$54.55/ square metre $1.53$5.07/ square foot **The rates as shown above represent the full non-residential DC rate. For the period of July 1, 2014 to March 1, 2019, Council approved a 50% reduction of the Non-Residential rate for industrial development. IF1 - 6 TABLE C CITY OF KITCHENER SUBURBAN AREA DEVELOPMENT CHARGE RESERVE 7012002 2015 TRANSACTIONS Surplus (Deficit) Balance December 31, 20143,509,173 Revenues DC Act Revenue10,252,658 Industrial Exemption Funding541,521 Interest Income (Expense)(20,338) Total Revenues 10,773,841 Expenditures City Share of Subdivisions1,309,660 Doon Rd S Cycling Path344,250 Block Line Rd Widening(14,819) SCADA58,752 Freeport SPS Upgrades and Forcemain2,750,941 Old Mill SPS1,580,006 Upper Hidden Valley SPS1,593 Strasburg Rd Sanitary Trunk Extension3,061,272 South Strasburg Creek Sanitary Trunk2,419,313 Homer Watson SPS(18,736) Doon S Sanitary Trunk Sewer(75,802) Mid/South Strasburg Trunk Sewer(301,312) Miscellaneous Creek Rehab204,000 Schneider Creek Channel(198,346) Engineering Studies169,038 Master Plan/Feasibility Studies136,680 Monitor Upper Blair Creek112,584 Fire Technology from Master Plan102,000 Fire Radio System Upgrades(6,923) Equipment Acquisitions and Upgrades428,559 Equipment Acquisitions Recovery184,000 KOF Recovery936,000 DC Study (discounted)(17,675) Planning Studies192,544 Heritage Impact Assessments13,147 Central Library202,510 Library Technology Upgrade37,481 Library Customer Needs Survey6,229 Williamsburg Cemetery Phase 2 Development9,858 Community Trails746,033 Neighbourhood Park Rehabilitation(269,461) Neighbourhood Park Development483,088 District Park Development(109,311) Victoria Park Redevelopment18,009 South District Park843,612 McLennan Park Redevelopment23,273 Huron Natural Area Redevelopment3,822 Centre Block Parking Garage(1,830,013) Library Recovery1,547,969 Charles and Benton Parking Garage Recovery368,518 Civic District Parking Garage Recovery671,422 Total Expenditures16,123,765 Surplus (Deficit) Balance December 31, 2015(1,840,751) IF1 - 7 TABLE C CITY OF KITCHENER CENTRAL NEIGHBOURHOODS DEVELOPMENT CHARGE RESERVE 7012006 2015 TRANSACTIONS Surplus (Deficit) Balance December 31, 2014(794,042) Revenues DC Act Revenue590,197 Industrial Exemption Funding- Interest Income (Expense)(16,200) Total Revenues573,997 Expenditures Intensification Allowance(44,087) DC Study (discounted)(1,331) Planning Studies21,699 Heritage Impact Assessments1,481 Central Library19,297 Library Technology Upgrade3,572 Library Customer Needs Survey594 Williamsburg Cemetery Phase 2 Development939 Community Trails71,090 Neighbourhood Park Rehabilitation(25,677) Neighbourhood Park Development46,034 District Park Development(10,416) Victoria Park Redevelopment1,716 South District Park80,388 McLennan Park Redevelopment2,218 Huron Natural Area Redevelopment364 Centre Block Parking Garage(169,987) Library Recovery147,031 Charles and Benton Parking Garage Recovery41,482 Civic District Parking Garage Recovery75,578 Total Expenditures261,985 Surplus (Deficit) Balance December 31, 2015(482,030) IF1 - 8 IF1 - 9 IF1 - 10 IF1 - 11 IF1 - 12 TABLE F DEVELOPMENT CHARGE 2015 EXEMPTIONS 50% Industrial Enlargement71,870 Additional Dwelling Unit(s) in Existing301,012 Downtown Exemption11,301 Municipal Use142,860 Redevelopment Allowance379,034 906,077 IF1 - 13 IF1 - 14