HomeMy WebLinkAboutDTS-09-173 - Engineering and Planning FeesREPORT
REPORT T0: Mayor Zehr and Members of Council
DATE OF MEETING: November 23, 2009
SUBMITTED BY: Jeff Willmer, Interim General Manager,
Development and Technical Services
PREPARED BY: Grant Murphy, Director Engineering Services
Alain Pinard, Interim Director of Planning
WARD(S) INVOLVED: All
DATE OF REPORT: November 20, 2009
REPORT NO.: DTS-09-173
SUBJECT: PROPOSED 2010 ENGINEERING AND PLANNING FEE
INCREASES
RECOMMENDATION:
That the engineering administration fee for plans of subdivision (Line 1381 in Financial
Services Department report FIN-09-138) be revised to 4.0% of construction costs; and
further
That the other Planning and Engineering fees remain as proposed in Financial Services
Department report FIN-09-138.
BACKGROUND:
On November 2"d, Council deferred the approval of the following fees until staff consulted with
the Waterloo Regional Homebuilders Association (WRHBA) and then reported back to Council
on those discussions:
Item Description
line 1220 Planning -presubmission consultation - $500
line 1221 Planning -presubmission consultation - $750
line 1234 Planning -presubmission consultation - $1,000
line 1352 Engineering review of site development works
drawings - 5% of cost estimate
line 1381 Engineering administration fee - 5% of construction
costs
The consultation has now taken place. Grant Murphy and Alain Pinard held a meeting with
representatives of the WRHBA on November 17t", and the matter was an agenda item at the
November 20t" meeting of the WRHBA Liaison Committee. This report provides additional
information with respect to the proposed fee increases for Engineering and Planning services in
2010, a summary of the discussions with WRHBA, and a revised recommendation based upon
this feedback.
REPORT:
The Planning and Engineering fees are being increased to ensure that service levels are
properly funded. It has been determined that over the past several years that the average
revenue generated from these fees has not been adequate to offset the costs of our staff time,
especially during the subdivision and site plan review processes. These fees do not just cover
simple administration tasks and typically require several re-submissions of applications during
the process to ensure that proposed developments are in accordance with the City's standards
and requirements.
The proposed fee increases intend to close a significant gap between the resource effort
expended and the fees collected from the property owners and land developers, thereby
reducing the amount of operating expenditures for growth related activity which are ultimately
being subsidized by the tax-payer.
Engineering Review Fees
An analysis has been carried out with respect to the fees associated with review of site
development works and the administration of subdivisions. It is clear that there is a significant
gap in the costs incurred by the City and the revenue collected from developers. The analysis
included a detailed review of employee timesheets, a review of revenue collected from
developments and a comparative analysis of fees that other municipalities charge for these
services.
The Engineering fee associated with the review of site development works drawings is proposed
to increase from 3.5% to 5% of construction cost estimate. The services provided under this fee
includes include pre-submission engineering review and comment (preliminary and detailed),
site plan review committee meeting attendance, engineering inspections, acceptance and letter
of credit calculations.
Based on activity based costing data from 2008 and 2009, it has been determined that the
amount of effort for the development engineering and transportation planning staff involved in
site plan development work is approximately $250,000. During this same period of time,
$180,000 in revenue was collected (directed to the Engineering Services Division} based on the
current fee of 3.5%. This indicates that there is a funding deficit of 28%, and the proposed fees
will help to close this funding deficit, through the collection of $230,000 in revenue 2010
(utilizing similar workload estimates).
In the case of the fee associated with the administration of subdivisions it is proposed to
increase from 3.0% to 5% of cost estimate. The services provided under these costs include
pre-submission applications (subdivisions), draft plan review and comment, engineering review
(preliminary and detailed}, inspections, project coordination and administration including
acceptance procedures and letter of credit reductions. There are other significant support
services also provided for by other divisions such as Legal Services involvement with Ontario
Municipal Board appeals, maintenance and warranty inspections by Operations and Community
Services. These additional services are not accounted for in this cost analysis and are
estimated to be in the order of magnitude of $150,000 per annum. This amounts to a total
operating expense of approximately $400,000 per year.
Based on activity based costing data for 2008 and 2009, it has been determined that the
amount of effort for the development engineering and transportation planning staff involved in
subdivision development costs the City approximately $270,000. During this same period of
time, only $160,000 in fees (at 3%) were collected (based on $5.34M of estimated construction
value). This indicates that there is a funding gap of 40%, and the proposed fee increases will
close this funding deficit, through the collection of $267,000 in revenue 2010 (utilizing similar
workload estimates).
A comparative review of the fees which other municipalities charge for engineering review of
subdivisions and developments is included in Table 1. This analysis has indicated that the
proposed fee increases are not out of line with what other municipalities are applying to
developers.
Table 1 -Comparison of Engineering Administration Review Fees (Subdivisions)
Cit of En ineerin Fees (% numbers are % of estimated project cost)
Kitchener 3.0% of estimated project cost
Waterloo 5.0% of estimated project cost
Cambridge Minimum application and inspection fee of $2500 OR $60 per unit for
residential and per 100m3 for non residential, to a maximum fee of
$10,000.
Guelph 4.0% of estimated project cost
Township of Wilmot 4.5% for the first $160k of estimated project cost; 4% from $160k-
800k of estimated pro'ect cost; and 3.5% over $800k.
Aurora 4.0% of estimated project cost
Brampton 3.5% of estimated project cost
Brantford (1/x + 0.75)%, where x is the cost of installation of public services in
hundred of thousands of dollars ($100,000). For larger projects, the
fee tends to be less than 1.0%.
Caledon 6.0% of estimated project cost
Hamilton 6.0% for the first $250,000 of estimated project cost; 5.0% from
$250,001 to $500,000 of estimated project cost; 4% from $500,001
to $2,000,000; and 3.75% over $2,000,000.
Kingston 1.0% of estimated project cost
Markham 5.1 % of estimated project cost
Mississauga 10% for Developments less than $100,000; 8.0% with a minimum of
$10,000 for Developments $100,000 to $250,000; 6.0% with a
minimum of $20,000 for Developments $250,000 to $500,000; 5.0%
with a minimum of $30,000 for Developments $500,000 to $750,000;
4.5% with a minimum of $37,500 for Developments $750,000 to
$1.5million; 3.5% with a minimum of $67,500 for Developments
greater than $1.5million.
Newmarket 6.0% of estimated project cost
St. Catharines Two stage approval process. Stage 1 -Draft Plan Approval $6,000
for review by all Departments. Stage 2 -Subdivision Agreement
$3,000 plus $10.00 for each lot greater than 40, to a maximum of
$3, 500.
Welland Depending on the development size and estimated project cost,
3.5%, 4% and 5%.
In discussions with WRHBA, they have identified that close to $15M in land development
construction will be taking place in 2010 alone - 3 times the estimate of the City staff,
amounting to about $450,000 in revenue based upon current 3% fee.
Staff appreciate the information provided by the representatives of the WRHBA and it is
acknowledged that the application estimates (i.e. workload) may be higher than originally
projected by the City. However, the predictions associated with the volume of applications for
subdivision development may be optimistic given the current economic situation. Assuming a
50% of WRHBA's estimate is achieved, this would result in $225,000 in revenue at 3%, still
significantly short of the $400,000 operating expense that needs to be covered off for this
particular service.
However staff agree with points made by WRHBA that further work needs to take place
regarding the review of administrative procedures, identifying potential ways to smooth the cash
flows, to map processes to ensure effective activity based costing is achieved, and that there is
potential for an increase in applications related to subdivisions above what is predicted by the
city.
Based on the information and discussion with WRHBA, Engineering staff are not recommending
a change to the proposed fee increase for the review of site development works drawings.
Unlike plans of subdivision, site plan revenues did not decline sharply in 2009 to account for
some of the funding gap noted earlier, and there is no expectation that site plan application
levels will be significantly higher in 2010. Therefore staff maintain that the proposed fee
increase from 3.5% to 5% of construction cost estimates is appropriate.
Fees for Pre-submission Consultation Meetings
The pre-submission consultation fees for most planning applications are new. The rationale for
these fees is as follows:
• Pre-submission consultation meetings are a new mandatory functionlservice and must
follow a prescribed process in order to implement the "complete applications" provisions
of the Planning Act and the Official Plan;
• Pre-submission consultations meetings are a valuable service where all study
requirements are identified upfront and an official meeting record is generated;
• The fees pay for staff time to organize and hold the meeting, and to prepare and send
out meeting records;
• The fees were calculated based on a combination of average preparation and meeting
time, and average salaries; and
• Previous to the City of Kitchener implementing the "complete applications" provisions,
"pre-application meetings" did take place but were not mandatory and did not follow a
prescribed process.
The situation is a little different with site plan applications. The City of Kitchener currently
charges a fee for pre-application meetings related to site plans but this fee is credited against
site plan application fees. It is proposed that the credit be discontinued and that a separate pre-
submission consultation fee be charged for site plan as is the case for all other applications.
The rationale is as follows:
• Pre-submission consultation meetings are now mandatory, follow a prescribed process
and have more status than the previous pre-application meetings; and
• The status of pre-submission consultations for site plan is the same as pre-submission
consultations for othertypes of planning applications.
There are few opportunities to make direct comparisons with other municipalities. Many
municipalities have yet to implement the new "complete applications" provisions under the
Planning Act. Of those who have, few have finalized decisions on whether to implement a new
fee for pre-submission consultation meetings in 2010.
The City of Waterloo is not proposing any new fees for pre-submission consultations in 2010
and Waterloo staff commented that the costs are recovered in their basic fees which are
generally much higher than the fees charged by Kitchener. For example, the 2009 fee for a
major zone change in Waterloo is $20,066 and the fee for an official plan amendment is
$20,000. In comparison the 2009 Kitchener fees for these types of applications are $8,458.30
and $6,360 respectively. The City of Cambridge is not proposing a separate fee for pre-
submission consultations in 2010. Overall, Cambridge's fees are comparable or a little lower
than Kitchener's fees.
Summary of consultation with WRHBA representatives
As noted previously, two meetings were held to discuss the proposed fees increases with the
WRHBA. Grant Murphy and Alain Pinard held a meeting with representatives of the WRHBA on
November 17t", and the matter was an agenda item at the November 20t" meeting of the
WRHBA Liaison Committee. As part of these discussions, WRHBA provided feedback on two
items -engineering review of site development works drawings (line 1352) and engineering
administration fee (line 1381).
Regarding the engineering administration fee (line 1381 }, WRHBA believe that the funding gap
in the current fiscal year can be explained by the substantial volume of registrations that
happened in the previous 5 years followed by the precipitous decline in the current year.
Construction values during the peak years were likely on the order of $15 million resulting in the
collection of about $450,000 in fees (at 3% fee). These fees were likely much more than what
was expended in those years, but any surplus was taken in as General Revenue.
In the current year, only $160, 000 was collected based on construction values of $5.34 million.
However, staff were still busy working through all of the issues associated with developments
from the previous years that were now going through final acceptance, letter of credit
reductions, lot grading issues, homeowner queries, etc. Since the review fee is collected as a
lump sum at registration while staff workload extends for several years beyond this point in time,
this is a cash flow issue and not a funding gap issue for DTS.
In 2010, based on Industry feedback, we anticipate an increase in development activity which
should generate fees (based on the current fee structure) in line or higher than DTS activity-
based costs. Given that the slowdown in the previous 12 months has allowed staff to clear
some of the backlog in older registrations, we also anticipate a lower level of staff activity in
these "carry-over" development activities.
Regarding the engineering review of site development works drawings (line 1352), WRHBA
believe that the underlying reasons for the funding gap in the current fiscal year may be similar
to those described above, but have offered no additional information to the City on this point.
It is WRHBA's view that the past 12 months have been atypical of development activity in the
City of Kitchener due to macro-economic conditions. The data collected by City staff during this
time period does not provide an accurate indication of whether a funding gap will persist in the
coming years. WRHBA has requested that the proposed increases for line 1352 and 1381 be
deferred or at the very least reduced based on the increased development activity forecasted by
the Industry for 2010.
FINANCIAL IMPLICATIONS:
The proposed fee increases will enable the City of Kitchener to recover a greater percentage of
the costs to process and review of development applications. Cost recovery is a sound practice
and a standard fiscal tool for balancing budgets. The proposed fee increases will help the City of
Kitchener address anticipated Operating Budget challenges in 2010.
ACKNOWLEDGED BY: Jeff Willmer, Interim General Manager
Development and Technical Services