Growth doesn’t pay for growth after all

Opinion

Hey there, time traveller!
This article was published 31/08/2024 (405 days ago), so information in it may no longer be current.

If this “development charge review” saga drags on much longer, developers in Brandon won’t be paying development charges to the City of Brandon. We’ll be paying the developers.

For those unfamiliar with the situation, Brandon City Council passed a development fee bylaw in 2018 in order to force developers to contribute toward the cost of infrastructure maintenance and upgrades that often come with real estate construction in the city. The bylaw was implemented in 2019 and has remained largely unchanged since then, except for a few minor cost-of-living rate increases.

For at least the past three years, city council has acknowledged that the rates were too low, in that they only recovered a small fraction of the substantial costs incurred by the city with respect to most development projects. In May of last year, the city hired consultants to review the fees the city charges developers and make recommendations as to how the city should treat the issue going forward.

In December of last year, city staff unveiled the first draft of the consultants’ recommendations. On average, the fees would increase by about 400 per cent. Those new rates would reflect the city’s costs associated with each infrastructure project, along with the debt-servicing costs it incurs with respect to each of those projects.

In the initial rate proposal, the development cost charges per would be $38,564 for low-density housing units, $28,496 for high-density units, and $11.94 per square foot for non-residential developments.

Developers and other stakeholders were given an opportunity to review the draft plan and, to the surprise of nobody, they argued the new fees would make new construction too expensive, would drive developers and construction workers out of town, and would generally kill our local economy.

In response to all those complaints, the city immediately lowered the proposed fees. The revised proposal was a per-unit cost of $26,552 for low-density housing (a $12,012 cut) and $19,620 for high-density housing (an $8,816 cut), with a $8.22 charge per square foot for non-residential developments (a $3.72 cut).

For those doing the math at home, that amounts to roughly a 31 per cent rate reduction across the board, after just one week of complaining by developers.

All was quiet on the fee review front until a couple of weeks ago, when the city released the consultants’ final report, along with a draft bylaw for city council to consider. Lo and behold (again, to the surprise of nobody who has been following the issue), the proposed development fees have been changed yet again.

Under the latest proposal, charges would increase between 1.8 and three times in “emerging areas” of the city, but between a whopping 9.8 and 16.1 times in “established areas.”

In emerging areas (the northern, western and southern edges of Brandon), the city currently charges $8,184 per unit for a low-density residential project, $5,294 per unit for a high-density project and a rate of $4.70 per square metre for a non-residential project.

Under the new proposed rates for emerging areas, the charge would rise to $21,193 per unit for a low-density residential project ($5,329 less than the already-lowered fee proposed last December), $15,660 per unit for a high-density project (a $3,960 reduction from last December) and a rate of $8.62 per square metre for a non-residential project (up from $8.22 last December).

In established areas (the areas north of Richmond Avenue, west of 17th Street East, east of 34th Street and south of the Assiniboine River), the city currently charges $911 per unit for a low-density residential project, $589 per unit for a high-density project and a rate of $0.53 per square metre for a non-residential project.

Under the latest proposal, the rates would skyrocket to $12,805 per unit for a low-density residential project, $9,462 per unit for a high-density project and a rate of $5.21 per square metre for a non-residential project.

The city’s explanation for the difference between the rates is that in emerging areas, the charges pay for water and wastewater treatment and associated water and sewer mains, intersections, roads and drainage. In established areas, however, the charges cover only water and wastewater treatment, intersections and roads.

Beyond that, the new rates assume that certain water treatment-related projects will be at least 50 per cent funded through grants from senior levels of government. That’s a very risky assumption.

Now that the latest rate plan has been disclosed, the city is consulting yet again with developers and other stakeholders to get their feedback. Does anybody expect the rate for “emerging areas” to go up after those consultations?

I’ve given you a lot of numbers to digest, and it may be hard to keep track of all the changes in the proposed development charges. The upshot of it all is that, for at least the past three years, we have been told that the revised development charges would pay for infrastructure costs associated with new developments.

We were told, again and again, that growth would pay for growth. It’s now clear that was never true.

The proposed development charges, which keep going down in the areas where the infrastructure costs are highest, won’t come close to paying the full costs incurred by the city — and the rate calculations don’t even include the perpetual cost of schools and expanded fire, police, garbage and snow-clearing services required for new neighbourhoods.

Many have suggested that Brandon appears to be trapped in a situation where we socialize risk and privatize profit. I agree. We subsidize some (but not all) developers by picking up the massive cost of infrastructure that is of no benefit to most of us, yet it’s the developers who reap the benefits.

We are forced to pay higher property taxes and water rates so that they can earn bigger profits.

That may not sound fair, but that’s the way it has been in Brandon for many years. We either accept it or we can push for real, lasting change at city hall. The choice is yours. The next election is two years away.