Key legislative amendments that came into effect on January 1, 2020 are as follows:
1. The Freezing of Development Charge Fees
Effective January 1, 2020, the City's DC rates and exemptions will be "frozen" based on the date a site plan application is made for a particular development or, if no site plan application is made, the date a rezoning application is made, whichever is later. If neither of these applications are made, the DC rate continues to be calculated as of the date of the issuance of a building permit. This change thus amends the current practice of calculating DCs with rates in effect on the date of building permit issuance. The City is permitted to charge interest on frozen DCs starting from the date the planning application is received, and deemed complete, until the date of payment. This freezing of DCs is only in effect for a period of two years from the date of the application for site plan control or rezoning.
2. Mandatory Deferral and Installment Payments Development Charges
Collection of DCs for rental housing developments (excluding non-profit) and institutional uses will be deferred from first building permit issuance until first occupancy and collected in six equal annual installment payments over the course of five years. Interest can be charged on the installment payments for these developments in accordance with s.26.1(7) of the DCA. Collection of DCs for non profit rental housing developments uses will be deferred from first building permit issuance until first occupancy and collected in twenty one equal annual installment payments over the course of twenty years.
The mandatory deferral prolongs the timeframe in which the City would otherwise receive payment of the DCs. An exception to the mandatory deferral is provided pursuant to s.27 of the DCA, which allows for an agreement to be entered into that would establish an alternative payment arrangement such as early payment. Developers are now requesting to enter into agreements with the City to be able to pay DCs when the building permits are issued to avoid paying the interest charges resulting from the mandatory deferral of DCs.
Discussion:
Payment of the DCs on the residential rental housing (multiple dwelling buildings) and institutional uses, pursuant to the amended legislation in effect as of January 1, 2020, will be required to be deferred from building permit issuance until first occupancy and collected in six equal annual installment payments over the course of five years or for non profit housing in twenty one equal annual installments over the course of 20 years. While this deferral was intended to assist smaller developers with cash flow requirements, municipalities are able to set an interest charge during the period of deferral. The rate of interest is dependant upon whether the deferral is secured, usually through a Letter of Credit, which is provided at a cost to the developer. Therefore, over the span of deferral, developers may incur more costs associated with the DCs. That additional cost must be weighed against the benefit of the delayed cash flow impacts.