HomeMy WebLinkAboutDSD-2022-106 - Brownfield Financial Incentive Program Application - 152 Shanley
Development Services Department www.kitchener.ca
REPORT TO: Finance and Corporate Services Committee
DATE OF MEETING: June 13, 2022
SUBMITTED BY: Danielle Sbeiti, Manager Realty Services, 519-741-2200 ext. 7357
PREPARED BY: Rob Morgan, Brownfield Coordinator, 519-741-2200 ext. 7734
WARD(S) INVOLVED: Ward 10
DATE OF REPORT: February 23, 2022
REPORT NO.: DSD-2022-106
SUBJECT: Brownfield Financial Incentive Program Application - 152 Shanley
Street
RECOMMENDATION:
That the Brownfield Financial Incentive Program Application for 152 Shanley Street,
received from 2701098 Ontario Inc. (Shannondale Developments) dated January 27,
That in exchange for a completed and filed Record of Site Condition for the subject
property, the owner will be provided a tax incremental grant on the redevelopment of
the property in the form of a rebate issued on a proportionate basis, annually for a
period not to exceed 10 years, on City taxes in an amount equal to 100% of the City
Tax Increment; and,
That the City Tax Increment be defined as the difference between the City portion of
real property taxes for the 2021 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 subject lands; and,
That the City property tax grant is estimated to be $781,670 based on
estimated City tax increment; payable in equal portions over a 10-year period
following re-assessment by MPAC, but subject to adjustment at the time the City Tax
Increment is actually calculated following completion of the project and the property
is re-assessed by MPAC; and,
That the Region of Waterloo Brownfield Coordinator be circulated a copy of any
decision made by Kitchener City Council regarding this Application; and further,
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
That the Mayor and Clerk be authorized to execute an Agreement, subject to the
satisfaction of the City Solicitor, with the Region of Waterloo and 2701098 Ontario
Inc., to implement the provisions of the Brownfield Financial Incentive Program
Application for 152 Shanley Street, as outlined in the Development Services
Department Report DSD-2022-106.
REPORT HIGHLIGHTS:
The purpose of this report is to obtain approval for the Tax Increment Grant (TIG)
detailed within this report.
The financial implications relate to the obligation of the City to pay out the Tax Increment
Grant over a 10-year period estimated to be approximately $78,167 per year for 10
years for a total payout of approximately $781,670.
agenda in advance of the committee meeting.
This report supports the delivery of core services.
BACKGROUND:
The Regional Brownfield Financial Incentive Program (BFIP) went through an extensive
Removal of Phase Two Environmental Site Assessment Grant;
Removal of 10% allowance for indirect remediation costs from the Regional share of
the Tax Increment Grant; and,
Revisions to the Regional Development Charge Exemption, with the exemption to be
completely phased out by August 1, 2024.
Corresponding changes to the Brownfield Financial Incentive Program were
subsequently approved by Council on November 22, 2021. The review resulted in the
removal of the 10% allowance for indirect costs. This change in the program is effective for
complete applications received after the date of Council approval (November 22, 2021).
In January of 2021, the City of Kitchener and Region of Waterloo received a joint Tax
Increment Grant (TIG) application from 2701098 Ontario Inc. relating to the remediation and
redevelopment of the property municipally known as 152 Shanley Street (Locational Map
attached as Appendix A). The 0.35 ha (0.86 ac.) property is located northwest of the
intersection of Shanley Street and Duke Street. A four-story vacant industrial building was
recently demolished due to unsafe conditions of the building. The demolition has
subsequently allowed for the remediation and redevelopment of the subject lands. The
property is being redeveloped into an 8 story 166-unit multiple dwelling with 133 parking
spaces.
REPORT:
The Environmental Consultants for this project have completed a Remedial Action Plan
dated February 2, 2021, as well as Phase One and Phase Two Environmental Site
Assessments. Within the scope of the Phase Two they completed a soil and groundwater
investigation which determined the extent of the contamination.
Historical Use of the Property
The property was first developed in 1904 by The Dominion Table Manufacturing Company
Ltd. It was used over the years by several manufacturing activities including furniture
manufacturing, foam manufacturing, solvent use, and storage.
Contamination and Remediation
The consultant completed comprehensive testing on the property which identified multiple
exceeded the applicable Ministry of the Environment Conservation and Parks (MECP) Site
Condition Standards, including the following:
Metals;
Petroleum Hydrocarbons;
Polycyclic Aromatic Hydrocarbons (PAHs);
Volatile Organic Compounds (VOCs); and,
Sodium Chloride.
Site remediation activities have included a combination of Risk Assessment, which
developed property specific standards, and remediation of remaining exceedances in the
soil and groundwater. Various techniques including soil excavation and disposal, soil
embankment and capping, and groundwater treatment are being utilized.
Eligible Remediation Costs
The applicant has submitted an estimated environmental remediation cost for the subject
property of $6,299,700.00. This amount plus a 10% allowance for indirect costs afforded
under the joint TIG program of $629,970.00 (which is eligible as the application was received
prior to Council amending the policy eliminating indirect costs on November 22, 2021)
results in a maximum eligible joint TIG of $6,929,670.00. Deducting assistance that will be
received through the Regional Development Charge (RDC) exemption under the Brownfield
Financial Incentive Program ($2,133,583.00) results in a maximum eligible joint TIG of
$4,796,087.00.
Based on the projected tax increment, the developer will be able to recover approximately
62% of the estimated remediation costs. This amount (TIG) would be cost-shared between
the Region of Waterloo and the City of Kitchener, as shown in Table 1 on the following page.
Further details regarding the Tax Increment calculation are provided in Tables 2 to 4.
Table 1: Remediation Cost Recovery
Max Eligible Remediation Cost $6,929,670.00
Less Region of Waterloo DC Exemption $2,133,583.00
Max Eligible Joint TIG $4,796,087.00
Less City of Kitchener TIG $781,670.00
Less Region of Waterloo TIG $1,360,370.00
Remaining remediation costs to be $2,654,047.00
paid by the Developer that cannot be recovered
through the Brownfield program
As noted above, the maximum eligible TIG amount after the Regional Development Charge
exemption is accounted for is $4,796,087.00. This amount, less the City and Regional Tax
Incremental Grant amounts results in approximately $2,654,047.00 in remediation costs that
the applicant is not eligible to recover. Specifically, the City and Regional taxes on the
property are not projected to increase enough following completion of the redevelopment to
cover all of the remediation costs.
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.
Pre-remediation Assessment and Taxes vs Post Redevelopment Assessment and Taxes
The anticipated joint Tax Increment Grant payments and schedule are determined for each
application based on the following steps:
The first step includes a calculation of the anticipated assessment increment. This is based
on the pre-remediation MPAC assessment value(s) and the estimated post-remediation and
redevelopment assessment value(s) for the development as provided by the Applicant
(Table 2).
Table 2: Potential Assessment Increment
Assessment Assessment Assessment
Increment*
$405,000.00 $23,421,000 (est.) $23,016,000 (est.)
*These values are based on estimates and will be confirmed by MPAC upon project
completion.
Secondly, the anticipated assessment increment is then used to calculate the expected
annual increase in municipal taxes (Region and City) that would be generated by the
remediation and redevelopment of the property (Table 3).
The
Table 3: Anticipated Tax Increment
Municipal Municipal Total
Area Municipality
Tax Increment*
City $2,727.75 $80,894.96 $78,167.21
Region $4,747.21 $140,784.33 $136,037.12
Total $7,474.96 $221679.30 $214,204.33
*Tax amounts do not include the education portion of annual taxes levied as the School
Boards do not participate in the program.
The annual Tax Increment Grant payments of approximately $78,167.00 (City portion) would
last the entire 10 years allowable under the program, as shown in Table 4, and would not
start until after the property is fully remediated, redeveloped and reassessed by MPAC, likely
not before 2025.
The total City portion of the Tax Increment Grant (sum of 10 annual payments) is $781,670.
Table 4: TIG Payment Schedule
Year City Region Total TIG
1 $ 78,167 $ 136,037 $ 214,204
2 $ 78,167 $ 136,037 $ 214,204
3 $ 78,167 $ 136,037 $ 214,204
4 $ 78,167 $ 136,037 $ 214,204
5 $ 78,167 $ 136,037 $ 214,204
6 $ 78,167 $ 136,037 $ 214,204
7 $ 78,167 $ 136,037 $ 214,204
8 $ 78,167 $ 136,037 $ 214,204
9 $ 78,167 $ 136,037 $ 214,204
10 $ 78,167 $ 136,037 $ 214,204
Total TIG $ 781,670 $ 1,360,370 $ 2,142,040
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
FINANCIAL IMPLICATIONS:
Capital Budget The recommendation has no impact on the Capital Budget.
Operating Budget The recommendation has no impact on the Operating Budget.
The approval of this application will obligate The City of Kitchener to provide an annual
municipal property tax rebate estimated to be $78,167 per year for 10 years upon
redevelopment of the property and reassessment by MPAC.
COMMUNITY ENGAGEMENT:
INFORM
the council / committee meeting.
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 their Planning and
Works Committee.
CONCLUSION:
Regional Staff and The Brownfield Steering Committee (Brownfield
Coordinator, 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 City of Kitchener Brownfield Remediation Program.
PREVIOUS REPORTS/AUTHORITIES:
DSD-2021-162 Brownfield Financial Incentive Program Review
APPROVED BY: Justin Readman, General Manager, Development Services
ATTACHMENTS:
Attachment A Locational Map
Appendix A -Locational Map