One of the factors that contribute to the cost of new building are Development Charges, which are fees collected from developers at the time a building permit is issued. The fees help pay for the cost of infrastructure required to provide municipal services to new developments, such as roads, transit, water and sewer infrastructure, community centres and fire and police facilities.
Since 1989 the name “development charges” – previously known as Local Improvement Charges, has been levied on developers. In 1997 The Development Charges Act came into effect and provided municipalities with the ability to levy development charges to help pay for new infrastructure required to facilitate new growth. Development Charges can only be used for Growth Related Capital Costs. If Development Charges benefit an existing development, for example a new fire station, the cost must be pro-rated. A Development Charge may apply to the entire municipality or to only a specific part or area. For example, a municipality may choose not to levy charges on development in a particular area, such as a downtown core. Currently the downtown core of Hamilton is exempt from development charges.
In addition, a municipality may apply more than one by-law to a specific area of the municipality. For example, a municipality may levy a municipal-wide development charge for general services, e.g., libraries, police and fire, and another development charge for hard services e.g., roads, water and wastewater, that applies only to a specific area of the municipality.
The implementation of Development Charges is a local municipal decision that meets the needs and goals of the specific municipality. A municipality that levies a development charge must establish a reserve fund for each service to which the development charge relates and the money collected can only be used for that service in that development. The municipality may only spend the money in a reserve fund on growth-related capital costs for which it was intended. Development charges do not pay for operating costs or for the costs of future repair and rehabilitation of infrastructure. Since most of those charges are Regional in nature some municipalities do not add their own for soft costs such as parks, transit, etc.
Because Development Charges are determined on a regional basis, the charges are all over the map – dependant of course on the type of infrastructure required. Development Charges can run anywhere from $0 a sq. ft. to $25 a sq. ft. for industrial and commercial developments.
Generally speaking, Development Charges are reviewed annually by the Province and each individual municipality. Once a Development Charge By-Law is passed it can be in effect for 3 or 4 years before any changes. But it is important to remember that each municipality is different and changes are made by the municipality to suit its individual needs. Before a by-law can be changed, the municipality must undertake a study and introduce the revised by-law within one year of the study’s completion. And of course, in the case where the developer believes the Development Charges are excessive, the developer has recourse to appeal to the OMB and ultimately to the Ministry of Municipal Affairs and Housing.
Development Charges are part and parcel of today’s growing municipalities. In order to ensure that quality infrastructure and services are available to meet the needs of the people who will live and work in these new developments, they are a necessary fact of life.