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HomeMy WebLinkAboutCAO-07-041 - Proposed Joint Regional/City Brownfields Financial Incentive ProgramJ Krrr.~~.R Chief Administrator's Office REPORT Report To: Development and Technical Services Committee Date of Meeting: September 24, 2007 Submitted By: Kathy Weiss, Director of Business Development Prepared By: Terry Boutilier, Senior Business Development Officer and Brownfield Co-ordinator Wards Involved: City Wide Date of Report: September 15, 2007 Report No.: CAO-07-041 Subject: Proposed Joint Regional -City Brownfields Financial Incentive Program RECOMMENDATION "That Kitchener City Council concur with the Proposed Joint Regional -City Brownfields Financial Incentive Program as outlined in Region of Waterloo Staff Report F-07-046/P- 07-079, subject to further discussion on the: calculation of the allowance for administrative costs; and the requirement that all applications must meet all adopted policy and design guidelines. INTRODUCTION Since 2005 Kitchener Staff and Council have worked with the Province of Ontario to have the Community Improvement provisions of the Ontario Planning Act amended to allow Upper Tier municipalities to participate in providing financial incentives to promote the clean up and redevelopment of Brownfield properties. The passage of Bill 51 by the province has allowed the Region and City Staff to prepare a revised and improved joint Brownfields program. It is the purpose of this Report to outline the features of the new Program. BACKGROUND 'A Brownfield is a property which contains environmental contamination either in the ground or buildings due to the operational activities of a previous land use, where the extent of the contamination renders the property vacant, under-utilized, unsafe, unproductive or abandoned. " Since November of 2003 the Kitchener Brownfields Community Improvement Plan has been providing a financial incentive to investor to partly assist for the costs involved with the clean-up and renewal Kitchener Brownfield sites. Briefly, the current plan provides financial assistance in the form of Tax Incremental Financing as follows: In exchange for a completed and filed Record of Site Condition or an approved Site Specific Risk Assessment, the City of Kitchener 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 the total Eligible Remediation Cost has been reached, whichever comes first, where: a) The City Tax Increment is defined as "the difference between the City portion of real property taxes as determined on the date of Application to this Program, 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 project completion; and b) Eligible Remediation Costs include the cost of conducting Phase 1 & 2 environmental studies, environmental remediation project costs, associated consultant fees, and costs of complying with a Certificate of Property Use (CPU) under 168.6 of the Environmental Protection Act, as necessary, incurred from November 6, 2003, (i.e. The date of the approval of this CI Plan by the Minister of Municipal Affairs & Housing) and the date of issuance of the first Building Permit (excluding demolition permits) for the proposed project. The City has processed four applications under the program - 537 Frederick Street, 90 Woodside Avenue (In-Towns), 1420 King Street East, and 112 Benton Street (Arrow Lofts). These four applications have resulted in the: • clean up and redevelopment of 11 acres of contaminated land, • 20,000 square feet of new commercial space (completed); • creation of 530 new Inner City residential units (under construction); and • private sector investment of approximately $78 million. While we have had success in stimulating renewal of some lands, the Program has two major deficiencies: • The first deficiency is that only the City portion of the property taxes can be used in calculating the TIF -Regional and Provincial portions are exempt. In some cases there is in not enough of an incentive available to stimulate action work on heavily contaminated sites. • The second deficiency is that all the incentive is provided subsequent to the completion of the development, and thereby the investor needs to provide all the money for the project up front. With these two deficiencies clearly articulated, the new proposed Program is outlined in detail in the accompanying two files (reports): ROW Report F-07-046/P-07--79 and Hemson Report., but the highlights follow. A. Brownfield Definition - no change in Definition. 2 B. New Financial Incentives -The new Program proposes to provide: 1. Regional Funds up to 50% of eligible costs associated with the completion of a Phase 2 Environmental Site Assessment up to a maximum of $40,0000; and 2. Reduction or elimination of Regional Development Charges up to the total eligible remediation costs of the contaminated site. (Development Charges are payable at the Building Permit stage}. Following the application of the above Regional grant assistance, any remaining incurred remediation costs would become the subject of the combined Regional and City Tax Incremental Grant Program. • The new Tax Incremental Grant (TIG) will provide assistance from both the Region and the City in proportion to the level of tax levied. • Investors will be able to submit applications at either the City of Kitchener or the Region of Waterloo. • Applications will be reviewed jointly by City and Regional staff and both City and Regional Councils will need to approve applications for funding. C. Calculation and Payment of Tax Increment Grants ^ The amount of the TIG would be based on the incremental assessment resulting from remediation and redevelopment of the site over a maximum period of ten (10) years; ^ The 10% allowance is to provide for the "administrative "costs (costs which are difficult to audit such as legal fees, planning fees, insurance, financing costs, and audit fees) associated with the rehabilitation; ^ Where the net costs of remediation exceed the incremental taxes payable over a ten (10) year period, the applicable TIG amount will be capped at the incremental taxes. (see Appendix 1, Example 1); ^ Where the net cost of remediation is less than the incremental taxes payable over a ten (10) year period, the applicable TIG amount will be capped at the net costs of remediation (see Appendix 1, Example 2); ^ TIGs would be paid over a ten (10) year or lesser period depending on the applicable TIG amount; ^ TIGs are only to be used to offset the costs of remediating a brownfield site (as listed in the proposed program document) and are not intended to cover redevelopment costs. D. Applicant Eligibility • Eligibility would be defined by criteria rather than geography; all brownfield sites located with a local municipal CIP would be eligible; • Current property owners cannot be responsible for the on-site contamination; 3 • Current value assessment must increase by a minimum of $100,000 as a result of remediation and redevelopment to justify the costs of approving and administering the program; • Phase 1 & Phase 2 ESA to be submitted with application; • Redevelopment plans must meet all approved policy and design guidelines; • Application for TIG must be made prior to the issuance of Building Permit. REPORT The Brownfield Steering Committee, consisting of Legal, Planning, Finance and Economic Development reviewed the proposed program at its meeting on September 14, 2007. Staff concur with the proposed Program with the exception of the following areas which should be discussed further. 1. Inclusion and calculation of administrative costs. The proposed Program includes an allowance for administrative costs (accounting, legal, insurance, financing, audit costs) incurred by the investor. Kitchener's current program allows this expense, subject to the submission of a valid invoice. The Brownfield Steering Committee suggest inclusion of the administrative expense but that the maximum expense should be capped at 10% of Eligible Remediation Expenses to a maximum of $100,000. 2. Redevelopment Plans must meet all approved policy and desi_~. uidelines. The Brownfield Steering Committee suggests that this condition should be removed from the Program. Linking the approval of the incentive to future redevelopment plans will become problematic, as we have come to learn that any future development will not meet all stated design guidelines. Further there may be differences of opinion between City and Regional aspirations for any particular site. The Brownfield Steering Committee notes that any development, to be a valid applicantlrecipient of the Program, must obtain a Building Permit. A Building Permit is only available subsequent to Site Plan Approval, the logical forum for City and Regional staff to resolve any outstanding site design items. 3. Finally, the Brownfield Steering Committee respectfully suggests that some course of alternative action should be defined in the case where City and Regional Councils disagree on any particular application. City and Regional Staff will still need to confer to finalize the Program, Agreements, and application forms. FINANCIAL IMPLICATIONS The implementation of a Joint Regional -City Brownfield Community Improvement program would allow both levels of government to shoulder the burden of providing financial assistance in accordance with the level of respective taxation. CONCLUSION The implementation of a Region -City Brownfield Financial Incentive Program will make available a greater and more equitable level of financial resources to stimulate the clean up and redevelopment of more heavily contaminated sites. City Staff will need to revise our current 4 Municipal Plan policies and the Brownfield Community Improvement Plan to effectively implement the new Program. Terry Boutilier Senior Business Development Officer & Brownfield Co-ordinator Rod Regier Executive Director of Economic Development ~nr+In~or~J • Regional Report F-07-046/P-07-079 Kathy Weiss Director of Business Development • Hemson Report - Proposed Tax Increment Grant Program for Brownfield Redevelopment 5