CITY OF VANCOUVER

ADMINISTRATIVE REPORT

 

Date:

April 12, 2005

 

Author:

Rick Scobie
Rob Jenkins

 

Phone No.:

604.873.7399/7082

 

RTS No.:

05095

 

CC File No.:

1758

 

Meeting Date:

April 28, 2005

TO:

Standing Committee on Planning and Environment

FROM:

Directors of Development Services and Current Planning

SUBJECT:

Specific Rezoning and Development Application Fee Increases to Achieve Recovery of Costs

RECOMMENDATION

GENERAL MANAGER'S COMMENTS

The General Manager of Community Services RECOMMENDS approval of A, B, and C.

COUNCIL POLICY

It is Council policy that fees and charges be established on the basis of the cost of providing the associated services or at market level where the service is provided in a market environment.

SUMMARY

As a consequence of the comprehensive review of revenues and corporate costs incurred in providing various services related to zoning, building and trade permit services, six service areas with cost recovery deficiencies were identified and reported on December 2, 2004. Specific adjustments were presented to achieve cost recovery in four of these areas: subdivision and strata conversion applications, file research and plans & miscellaneous fees. These adjustments were enacted on December 14, 2005. Work has now been concluded on specific adjustments to the other two areas: rezoning and development application fees. These are discussed with further information provided to arrive at adjustments to achieve cost recovery as identified through the completed comprehensive review.

Recommended for rezonings is a 10% increase to some categories, the addition of two new fee category types and no increase to mega project CD-1 categories. For development applications, specific increases are recommended for one- and two-family dwelling applications and otherwise an approximate 13% increase is recommended.

PURPOSE

This report reiterates the rezoning and development application cost recovery limitations as outlined in the report before Council on December 2, 2004. It then outlines specific rezoning and development application fee increases and new categories to achieve the appropriate level of cost recovery.

BACKGROUND

Rezoning and development applications are two of the six service areas identified through the comprehensive, corporate review which found revenues generated were significantly deficient to recover corporate costs incurred in delivering these services. The six service areas and corresponding shortfall amounts are presented in the following table.

SERVICE TYPE

COSTS ($,000)

REVENUES ($,000)

SHORTFALL ($,000)

REZONING

$1,466

$1,138

$328

SUBDIVISION

$528

$272

$256

STRATA CONVERSION

$84

$1

$83

DEVELOPMENT APPLIC.

$7,123

$4,205

$2,918

PLANS & MISC.

$158

$115

$43

FILE RESEARCH

$165

$125

$40

The report before Council on December 2, 2004, discussed three aspects of the costs that were tallied which might not appropriately be included for cost-recovery. These included various existing subsidies, corporate overhead and inferred costs. Excluding these, the shortfall figure for development applications in the foregoing table was reduced from $2,918,000 to $636,000.

In the case of rezonings it is important to note that before arriving at the amount to recover of $328,000, the entire rezoning process was reviewed with respect to the amount of staff resources applied through the full array of reviewing departments including Planning, Engineering, Legal Services, Social Planning and Parks. Specifically the review considered, in addition to the work directly serving private rezoning applicants, what proportion of the work undertaken by staff was a direct or indirect service to the general public (i.e., policy development triggered by and concurrent with rezonings which has broader applicability and public benefit). It was determined that 40% of the staff time allocated to rezonings was directly or indirectly serving the general public - the cost of this time was, therefore, not factored into the rezoning costs to recover.

Council approved the recommendations in the report on December 2, 2004 and amending by-law to increase the fees for subdivision, strata conversion, plans & miscellaneous services, and file research were enacted on December 14th. As described in the report before Council on December 2nd, analysis had not yet concluded on which specific rezoning and development application fees ought to be revised to recover the shortfall amounts of $328,000 and $636,000, respectively. This work is now concluded and is the subject of this report.

DISCUSSION

The Zoning and Development Fee By-law contains two schedules, the first dealing with development application fees, and the second with rezonings. Schedule 1 specifies fees for 34 different categories of development applications. A number of these fees are further differentiated, frequently specifying a base fee applicable to a certain scale of development, a fee increment based on additional development, and a maximum fee or "cap". Collectively, there are 52 different fee values. Schedule 2 is similarly fashioned and contains 22 different fee values related to different categories of rezoning applications.

Preparing recommended fee revisions to achieve the identified shortfall in revenues has necessitated a comparative approach, considering not only the different levels of work involved in processing different categories of applications, but also the number of each type of application commonly submitted in a year. For those categories of fees that are further differentiated, consideration also had to be given as to whether the base fee should be increased, the fee increment that applies beyond the base fee threshold, and/or the maximum fee payable.

As the analysis progressed and alternative fee increases were generated, consideration was also given to the perceived market elasticity and the implication of fee increases to different categories of development application and rezoning application. For example, to what extent might fee increases to some types of projects encourage more applicants to undertake work without seeking the required approval, or cause desirable development to be deferred or abandoned.

For both development applications and rezonings, proposed increases in specific categories of fees are proposed in a manner that staff believe will generate the identified revenue shortfalls of $636,000 for development applications and $328,000 for rezonings.

The existing fee schedules are attached as Appendix A. There are two columns on the right hand side. The existing fees are in the first column, proposed fees in bold in the second column.

RESULTS OF DETAILED COST RECOVERY ANALYSIS

Development Applications - In development applications, two cost recovery short fall circumstances were identified:

1. Fees to meet cost recovery in a majority of development permit categories (26 of 30 categories) need to be increased in the order of 13%;

2. In four one- and two-family dwelling categories, fees currently range from $800 to $1,700, depending on the inherent complexity and level of conditionality for each application type. For these application categories, fee increases are proposed in the range of $150 to $335.

Rezoning Applications - In rezonings, four cost recovery circumstances were identified:

1. In the case of the most complex rezonings (i.e. mega-project CD-1s on sites over 40 000 m² (10 acres)), no fee increases are required. Fees for these application types have already been substantially increased over the last 15 years - ongoing monitoring confirms these fees continue to achieve cost recovery.

2. In recent years, downtown CD-1s (defined by Map 1 in Appendix A) have become increasingly complex with applicants seeking, for example, substantial floor area bonuses, height increases, transfer of heritage density, etc. which in turn results in measurably more complex public benefit review and project impact assessment (i.e., livability, urban design, traffic, etc.) as well as more extensive public consultation.

3. CD-1 rezonings on sites between 8 000 m² (2 acres) and 40 000 m² (10 acres), including larger site Highway Oriented Retail (HOR) proposals, often have similarly complex elements to Downtown CD-1s and can also include other complex elements such as traffic and retail impact assessments, as well as extensive public consultation.

In application circumstances 2. & 3., it is proposed the base fee be increased from $19,000 to $50,000 and beyond the base fee threshold, the increment be increased from $189 to $230, for each additional 100 m². It is estimated these fees will result in cost recovery for the processing of these application types.

4. In all other rezoning fee categories, a relatively modest 10% increase is required to achieve cost recovery.

SCHEDULE 2 NEW REZONING FEE CATEGORIES

Appendix A includes proposed text amendments to reflect recommended fee increases and to add new fee categories which address the two above-noted specific shortfall circumstances related to Downtown District CD-1s and CD-1s on sites between 8 000 m² (2 acres) and 40 000 m² (10 acres). The proposed text amendments are presented in bold script in Appendix A.
CONSULTANT'S FINDINGS

Before recommending revised fee schedules, it was important to determine whether the proposed fees could result in any significant negative market or financial impacts on development. Coriolis Consulting Corp. was retained to analyse the proposed fee changes, in terms of impacts on:

With respect to the (proportionally) larger increases, the consultant concluded the following. In the case of the $150 to $335 increase for one- and two- family dwelling development application fees, the consultant note that while it is a relatively large increase, it represents a very small marginal cost increase with respect to overall project costs (in the order of one tenth of one percent, even for the lowest cost new single family detached house) and that even an increase of several hundred dollars (not recommended in this report), would not cause noticeable market impacts.

In the case of the proposed rezoning fee increases for CD-1 sites in the Downtown District, the incremental cost increase is estimated to range from $0.48 per sq. ft. (for a small site at 3.0 FSR) to $0.15 (for a large site at 5.0 FSR). Staff note that recent downtown CD-1s have involved large sites with proposed FSRs of 9.0 or higher - meaning that the incremental cost for these applications would be less than $0.15 per square foot. For CD-1s on sites between 8 000 m² (2 acres) and 40 000 m² (10 acres) outside of the Downtown District the impact of the proposed fee increases was estimated at $0.14 per sq. ft. or $109 per residential multi-family unit (based on an FSR of 2.0).

In summary, Coriolis concluded that none of the proposed fee increases would have a noticeable impact on market conditions, the rate of new development or project viability. The consultant provided some additional commentary which has been addressed in the completion of the review and the recommended fee increases.

FINANCIAL IMPLICATIONS

It is estimated that the proposed fee increase will generate approximately $964,000 in additional annual revenue ($636,000 - Development fee, $328,000 - Rezoning fees) in 2006. For 2005, incremental revenue will depend on the enactment date (or effective date) of the amending by-law as well as level of development activity. Therefore, the revenue budget is recommended to be increased in 2006 based on continued evaluation of development activity in 2005. Further, the additional revenue will offset increased 2006 costs associated with the Development Application Process initiative approved in the March 17, 2005 Interim Report on the 2005 Operating budget.

IMPLEMENTATION PLAN

It is recommended that the new fees would be effective immediately upon enactment of the amending by-law. Although not recommended, Council could enact the by-law but incorporate a later effective date if Council determines a delay would be advantageous.

CONSULTATION WITH INDUSTRY GROUPS

The report on the results of the comprehensive, corporate fee review before Council on December 2, 2004 identified the shortfall in development application and rezoning cost recovery. It was circulated to industry groups in mid-November. The shortfall figures for cost recovery had been shared with the Urban Development Institute (UDI) Liaison Committee last summer.

Staff consulted with representatives of the UDI on two occasions this year as the report was being prepared. This current report was sent to industry groups when it was submitted to the City Clerk.

It is anticipated there may be delegations or submissions from industry groups when this report is considered by Council.

CONCLUSION

Specific development application and rezoning application fee increases are recommended which will result in meeting the City's cost recovery policy without impacting market conditions, rate of new development or project viability.

LINK TO APPENDIX A

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pe20050428.htm

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