HomeMy WebLinkAboutDTS-06-079 - Built Heritage Resource Preservation & Maintenance Agreement Template1
Kd LR
Development&
Technical Services
6 REPORT
Report To: Development & Technical Services Committee
Date of Meeting: May 15, 2006
Submitted By: Jeff Willmer, Director of Planning (741 -2325)
Prepared By: Leon Bensason, Heritage Planner (741 -2306)
Ward(s) Involved: All
Date of Report: May 4, 2006
Report No.: DTS 06 -079
Subject: BUILT HERITAGE RESOURCE PRESERVATION &
MAINTENANCE AGREEMENT TEMPLATE (HERITAGE TAX
REFUND PROGRAM)
RECOMMENDATION:
That the establishment and use of Built Heritage Resource Preservation & Maintenance
Agreements be approved in a form satisfactory to the City Solicitor and generally as
outlined in Report DTS 06 -079, in securing the conservation of select properties and
qualifying property owners for a heritage property tax refund.
BACKGROUND:
On January 27, 2003 City Council approved the establishment of a Heritage Tax Refund
Program. Under the program, owners of property designated under the Ontario Heritage Act
and subject to a heritage conservation easement agreement or a preservation and maintenance
agreement on a built heritage resource, may qualify to receive up to a 40% refund of taxes for
municipal and education purposes levied on their eligible property. Properties in the multi -
residential, commercial or industrial property classes are limited to a maximum 10 heritage tax
refunds.
The heritage tax refund program was established in part to assist property owners who meet the
program eligibility criteria with the typically greater cost often associated with maintaining
heritage property which are subject to restrictive covenants; to encourage more property owners
to designate their property and enter into heritage easement agreements; and to serve as an
economic development tool, particularly in attracting investor interest to specific heritage
properties targeted for adaptive re -use.
In 2003, the first year of the program, three property owners who met the eligibility criteria
applied for and received a heritage tax refund. A total $13,490 was refunded to property owners
in the year 2003 with the City's share of that amount being $5594. The same three property
owners applied for and received heritage tax refunds in the year 2004. The Program achieved
greater success more recently when two additional residential property owners became eligible
and applied for a heritage tax refund in 2005, by virtue of the designation of their property and /or
the heritage easement agreement they entered into in 2003 and 2004. Though the heritage tax
refund program has encouraged some residential property owners to designate their property
and /or enter into heritage easement agreements, it has yet to attract potential investors to
heritage properties targeted for adaptive re -use.
REPORT:
Under the provisions of the Municipal Act, in addition to designation under the Ontario Heritage
Act, a property owner must also enter into either a heritage conservation easement agreement
or an agreement with the City respecting the preservation and maintenance of the heritage
resource, in order to be eligible for a municipal heritage tax refund. The City has previously
entered into heritage easements agreements with property owners, but to date has never
established a template for preservation and maintenance agreements for built heritage
resources.
Historically, the City of Kitchener has used the Ontario Heritage Trust's template for the heritage
easement agreements it has entered into with property owners. These heritage easement
agreements typically apply a measure of protection and obligation on the heritage property
owner that go beyond those established through heritage designation alone, including applying
provisions addressing insurance requirements and building /re- building in the event of damage.
It has been suggested that the reason why the heritage tax refund program has not been
successful in attracting the development /investment industry to targeted adaptive re -use sites of
heritage significance, is that the heritage easement agreement template used by the City is not
commercially viable or realistic, given the insurance commitments and third party mortgage
agreements which are often associated with such properties and developments.
In an effort to understand and appreciate why the program has not been successful in attracting
the development /investment industry to date, City staff circulated a copy of its standard heritage
conservation easement agreement template to over 100 representatives of the
development /investment industry both locally and within the GTA. The responses received from
the development /investment industry generally suggest that the City's heritage easement
agreement template imposes obligations that are unrealistic within a commercial context and
compromise too greatly the rights of the mortgagee.
The City's heritage easement agreement template contains a number of clauses designed to
collectively ensure the easement holder (the City) will have a defensible, enforceable and
permanent interest in the conservation of qualifying heritage property. Heritage conservation
easement agreements provide an array of heritage benefits such as good stewardship and
property maintenance, public accessibility and interpretation, and ensured remedies for repair
and restoration.
Most recently, the City has been flexible in drafting heritage conservation easement agreements
to meet specific needs and requests from private property owners. However, in so doing, the
City has been careful not to dilute the provisions in the agreement so as to compromise the
City's ability to adequately protect the heritage attributes of the property over the long term. To
do so may raise the expectations of other property owners to get similar concessions, and lead
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to property owners with easement agreements requesting that the City renegotiate their existing
heritage easement agreements on similar terms, which staff does not believe is in the City's
best interest. Further, a representative of the Ontario Heritage Trust has expressed concern that
this approach could undermine the current consistent use of the standard heritage easement
template throughout the Province.
Staff acknowledge that a heritage conservation easement agreement may not serve as the ideal
mechanism to conserve certain types of commercial properties or other heritage properties
targeted for adaptive re -use. In this regard, the eligibility criteria for a heritage tax refund as
defined in the Municipal Act and By -law 2003 -20 which established the heritage tax refund
program in Kitchener, also identifies the owner entering into a "preservation and maintenance
agreement" as qualifying a property (in addition to heritage designation) for a heritage tax
refund.
Built Heritage Resource Preservation and Maintenance Agreement
Although the "preservation and maintenance agreement" terminology comes directly from the
Municipal Act, 2001, there does not appear to be a provincial standard for this type of
agreement. Staff have drafted a new preservation and maintenance agreement template with
the objective of adding an increased level of protection above the heritage designation of a
heritage property, but to a lesser degree than in heritage conservation easement agreements.
The following table outlines some of the significant differences between the proposed new
preservation and maintenance agreement template and the City's existing heritage conservation
easement agreement template.
HERITAGE CONSERVATION
EASEMENT AGREEMENT
"Reproduction" value insurance
required.
First encumbrance on title - City
retains first right to insurance proceeds.
Prohibits changes to the general
appearance or topography of the property.
Requires City approval for the installation
of all signs and fixtures.
Requires availability for public viewing
and public access to the property.
3
NEW MAINTENANCE &
PRESERVATION AGREEMENT
"Like kind & quality" replacement
value insurance required.
Insurance proceeds subject to the rights
of mortgagees, commercial lenders and
owner first.
No provision prohibiting changes to the
general appearance or topography of the
property (other than to the heritage
attributes).
Requires City approval for the installation
of signs and fixtures which impact
heritage attributes only.
No provision requiring availability for
public viewing and public access.
Staff are of the opinion that the new Built Heritage Resource Preservation and Maintenance
Agreement template will address many of the concerns previously identified by the
development /investment industry regarding heritage easement agreements, and may result in
greater investor interest in heritage properties having adaptive re -use potential.
FINANCIAL IMPLICATIONS:
No new or additional capital budget requests are associated with the recommendations made in
this report, however Council's approval of a new built heritage resource preservation and
maintenance agreement may ultimately result in more property owners becoming eligible for a
heritage tax refund. Council will be advised of the financial implications of property owners
becoming eligible to receive a heritage tax refund at the time of Council's consideration of a
notice of intent to designate a property and /or when Council considers entering into a heritage
conservation easement agreement or a built heritage resource preservation and maintenance
agreement.
The Heritaae Tax Refund Proaram and the Citv's New Adaative Re -Use CIP
Council recently approved the establishment of a new Adaptive Re -Use Community
Improvement Plan. The Adaptive Re -Use CIP offers tax increment based (or equivalent) grants
referred to as Tax Incremental Financing (or TIFs) to eligible property owners. A TIF is the
difference between the pre- improvement tax level of a property and the post- improvement tax
level after reassessment. Adaptive re -use projects that conserve historical or architecturally
significant features to the satisfaction of the Director of Planning may in part make a property
owner eligible for an adaptive re -use grant. Under the program, the City will provide a grant in
the form of an annual rebate on City taxes, in an amount equal to 100% of the City Tax
Increment. The annual grant will continue for a maximum period of 10 years, or until $10,000
per residential unit has been achieved and /or 5% of the Eligible Project Costs has been reached
for office and commercial floor space, whichever comes first.
It should be noted that the adaptive re -use grant may be provided in addition to the financial
incentive offered to eligible property owners under the Heritage Tax Refund program. Under the
heritage tax refund program, eligible property owners may qualify to receive up to a 40% refund
of taxes for municipal and education purposes levied on their eligible property. Properties in the
multi - residential, commercial or industrial property classes (typically property classes associated
with adaptive re -use projects) are limited to a maximum 10 heritage tax refunds.
A property owner may qualify for both tax refund programs given the eligibility criteria
associated with the City's heritage tax refund program requires that the property owner
designate their property under the Ontario Heritage Act and enter into a restrictive covenant to
protect the property in perpetuity, in contrast to the adaptive re -use grant which may or may not
be associated with heritage conservation activity, but if undertaking such activity, need only
meet the satisfaction of the Director of Planning, with no requirement addressing long term
conservation objectives.
CONCLUSION:
City staff recommend that Council approve the use of the Built Heritage Resource Maintenance
and Preservation Agreement template, in securing the conservation of select built heritage
resources and in qualifying property owners for a heritage property tax refund.
Leon Bensason, MCIP, RPP
Heritage Planner
5
Jeff Willmer, MCIP, RPP
Director of Planning
