POLICY REPORT
DEVELOPMENT AND BUILDING

TO:

Standing Committee on Planning and Environment

FROM:

Director of Current Planning

SUBJECT:

DCL Rate for VGH CD-1 District

 

RECOMMENDATION

CONSIDERATION


CITY MANAGER'S COMMENTS

COUNCIL POLICY

On January 28, 1999, Council approved a city-wide Development Cost Levy (DCL) and interim Community Amenity Contribution (CAC) policies. The interim CAC's apply to all private rezoning applications received as of December 8, 1998, while DCLs apply to all building permits as of January 28, 2000. The DCL interim rate is $1.00 for industrial uses in industrial areas and $2.50 for residential, commercial, institutional and all other non-exempt uses.
PURPOSE

The Vancouver Hospital and Health Sciences Centre has applied for rezoning to permit Medical Biotechnology uses in the VGH CD-1 District. The application is accompanied by a request to have industrial Development Cost Levy (DCL) charges apply to this development. Under current by-laws, the non-industrial use / area rates would apply. This report seeks Council direction regarding which DCL rate should apply.

DISCUSSION
Background

Along with a negotiated Community Amenity Contribution to be determined through an In Camera report at the time of referral to Public Hearing, the City wide Vancouver DCL by-law applies to VGH as it does elsewhere in the City. The normal DCL rate would apply unless Council establishes separate rates for this district or for certain uses within this area. If Council chose to establish separate rates for the VGH CD-1 District several alternate approaches are possible, as follows:

City-wide Rate
The DCL interim rate is $1.00 for industrial uses in industrial areas and $2.50 for residential, commercial, institutional and all other non-exempt uses. These rates were established by Council January 28, 1999. To illustrate how the $2.50 City-wide rate has been applied, forexample, this rate has been applied to sites such as the Women's and Children's hospital. Based on the current by-law and policies, it would apply to new development on the VGH site, for uses including hospital facilities, retail, restaurant and other commercial uses, residential and medical biotechnology. It should be noted that some buildings on this site contain multiple uses or may change over time from one use to another.

Industrial Rate
Council approved a City-wide industrial DCL rate of $1/ft² for all industrial uses in industrial zoning districts, including the newly implemented I-3 areas. An additional area-specific DCL which adds $3 on top of the $1 has now been approved for the False Creek Flats to cover costs particular to those areas.

Financing Growth Review
When Council introduced the city-wide DCL as a development charge with an interim rate, they also instructed Planning and Finance to undertake the Financing Growth Review. The purpose of the Review is to refine and improve the city-wide DCL and CAC policy in the larger context of how the costs of growth will be paid. The review is well underway and will include policy options on rates, including treatment of institutional uses. Information from the review to date has been incorporated into this report.

Issue Analysis

The Vancouver Charter permits the establishing of DCL rates which may vary by area and land use. Although some variation in rates is desirable, this structure has also sought to establish broad equity among sites. This section assesses arguments for and against varying DCL rates in response to the current rezoning proposal for VGH.

In this instance, proponents of the biotech precinct at VGH note that "Medical Technology" or "biotech" uses are considered to be high tech uses. They point out that significant components of anticipated development for high tech uses are expected to occur in I-3 districts and that high tech uses in I-3 districts pay industrial district DCL rates ($1/Ft²). They note that the proposed buildings would not be for profit or sale for capital gain. Therefore, they believe the current I-3 rate of $1 should apply to VGH. Otherwise they feel it would be inequitable and give developers of similar buildings in I-3 districts a financial advantage. The first argument listed below lends support to this approach. However, a number of policy implications of this approach are inconsistent with the City's direction on DCLs as outlined in subsequent arguments.

Encouragement
Council may wish to encourage particular types of high tech use, such as medical technology, to locate in Vancouver. The applicant believes that a reduced DCL rate for VGH would encourage this. If the VGH proposal succeeds in founding businesses which grow into larger enterprises in other districts this approach could be broadly beneficial.

However, it is difficult to imagine other high-tech developers who accommodate small or growing firms not asking for the same consideration in other parts of the city, particularly downtown where land costs are higher and high technology development is assessed the $2.50 rate. In any event, based on independent market analysis on the impact of development charges by Coriolis Consulting Corp., it appears that DCL's in Vancouver make very little impact on locational decisions.

Equity
VGH feels that it would not be equitable for medi-tech uses to pay a higher rate in the VGH district than it would a high tech development in an I-3 District. However, high tech uses in commercial districts or downtown may feel that it is not equitable for VGH to pay less than they do. The distribution of the top 25 high tech firms in the city (see Appendix B) indicates that the majority are located in non-industrial districts, primarily the CBD, Yaletown and near Broadway. These areas have an employment density and servicing patterns comparable to the area surrounding VGH and pay the City-wide DCL rate of $2.50 which would otherwise apply to VGH.. For instance, the standard of pedestrian amenity in the vicinity of VGH is expected to be higher than is typical in an industrial district

A lower rate for VGH medi-tech uses might create expectations that a lower rate should apply for comparable uses elsewhere. In practise, it could be difficult to distinguish legitimate medi-tech development from more generic lab and office projects prior to occupancy.

Competition Between VGH and I-3
During presentation of the policy review report presenting the VGH Policy Statement, Council members asserted that the proposed development could already occur in the recently created I-3 Districts. VGH representatives argued that the proposed uses were not the same as those for which Council has zoned the I-3 Districts. The start up or incubator nature of the companies involved was argued not to be in competition with the I-3 districts.

Additional DCL Levy
In any case, more detailed analysis of servicing costs in the False Creek Flats by Coriolis Consulting Corp. indicates that additional DCL charges totalling $3 per square foot would be justified. Requiremenrts for an area specific DCL in the other I-3 area, Grandview Boundary, are under review. If additional DCL charges are required, a lower rate for the VGH precinct could then appear to give an inequitable advantage to VGH high tech uses.

Public Benefits
This request from VGH is, in part, based on their belief that a public good will derive from this project by virtue of its benefit to the hospital and therefore to the public. This argument could also be raised in respect to direct hospital development as well. In this case, it applies to related development intended to benefit the institution. Regardless of the public benefit derived from this type of use, the City retains the financial responsibility for maintaining public amenities.

The question of whether Provincial and other institutions should have lower DCL rates is being addressed in the Financing Growth Review. Meanwhile, Council has been assessing the full DCL rate to Provincial institutions like Women's and Children's Hospital. Based on Review discussion so far, it is very possible that this will continue as City policy. (If, however, lower rates are implemented after the Review, VGH will likely be able to take advantage of them, since DCLs are paid at Building Permit applications.) In the interim, without a Council decision to reduce DCL rates for the institutions themselves, it would be inconsistent to apply the public benefit rationale and give lower rates to commercial developments which grow from an institution's desire to create an endowment.

Precedent
Other institutional uses such as hospitals, technical schools, colleges and universities which have underutilised land as a developable asset are likely to also seek lower rates for related initiatives on these lands if VGH is assessed a rate lower than the city-wide rate.

Rate Equity Over Time
When a DCL rate applies to the whole class of uses within a district, changes in use within buildings over time remain equitable. However, as in the case at VGH when uses from different DCL rate categories may move into the space, equity among uses would be undermined.

CONCLUSION

Three principal factors lead staff to conclude that it would be more equitable to continue to apply the City-wide DCL rate than to create a lower rate for VGH medical technology uses or a series of rates for various uses in that district.

First, high tech uses may exist in numerous different zoning districts across the city with most prominent companies now located in the CBD, Yaletown and near Broadway, in areas where employmant densities and servicing standards are comparable to the VGH area and which currently pay the City-wide DCL rate. Owners could feel that their locations are comparable to that of VGH and that the same DCL's should apply. Secondly, on April 12, 2001, Council approved an area specific DCL levy of $3.00 for the False Creek Flats in addition to the $1.00 city wide industrial DCL rate, which results in the VGH District actually having a lower total DCL charge ($2.50/ per ft²) than new I-3 development in the Flats. Finally, a lower rate for VGH would be inconsistent with Council's policy of applying the city-wide rate to other public entities such as Womens' and Childrens' Hospital. It is likely to precipitate demands for comparable rate variations for business developments on numerous other institutional sites in the city, which to date Council has not provided, even for the principal institutional uses.

Therefore, staff recommend that Council continue to apply the current City-wide DCL rate to the VGH precinct. Alternatively, staff anticipate that a much broader analysis would be needed of the implications of extending a lower DCL rate of $2.50 to other comparable sites.

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APPENDIX `A'
Page 1 of 2

DCL Request

-Accompanying Letter - 16 July 2000

Please find attached the formal Rezoning Application for the VGH site of the Vancouver Hospital and Health Sciences Centre. Our team has attempted to address all of the issues that have arisen through the Public Policy Review process that the City conducted and we believe that our proposed solutions meet and exceed virtually all of the expectations of the interested parties.

As we outlined two years ago, our goal is to create a Medical Technology Park that will make Vancouver a world player in this field. In doing so, we can also bring certainty to the local issues relating to completion of the hospital facilities, provision of new open space, retention of the 1906 Heather Pavilion and creation of new housing.

We are asking that the City give consideration to several issues as our application is being processed:

· Community Amenity Charges. The City's report to Council notes that payment in kind will be considered. Currently, the City is responsible to either renovate or demolish the 1906 Heather Pavilion. Should the Hospital renovate this building we request that the City consider this investment by the Hospital as a credit for CAC's for the entire zone.
· Our proposal includes provision of an additional 1.3 acres of open space beyond the

· Development Cost Levies: As we discussed this week, it seems inequitable that the DCL rate proposed for this site is almost three times the rate to be charged for the I-3 zones. In both areas, the users of the space will be primarily high technology entities in similar building forms. Please advise how we can resolve this inequity.
· Neighbourhood Traffic Study: Our consultants are prepared to work with the City immediately on this work. It is my understanding that this process will not impede the proposed schedule for the rezoning so your confirmation would be appreciated.

We understand that you require us to host a public meeting in mid September to present our application to all interested parties. Kindly confirm that this is still required and, if so, the format you feel best meets this need. We would also appreciate your estimated date for your report to Council and the requisite public hearing.

We are seeking a formal letter of support from the Vancouver Richmond Regional Health Board and the Ministry of Health and will forward these at the earliest opportunity.

Demand for this form of development on the VGH site is rising and the Hospital regularly receives requests from both medical technology firms and inventors seeking space and opportunities. We are therefore very confident of the merit of this proposal and ask for your guidance in bringing this to Council for a decision at the earliest possible date.

Yours truly,

Murray T. Martin
President & CEO

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