Agenda Index City of Vancouver

POLICY REPORT
URBAN STRUCTURE

TO:

Vancouver City Council

FROM:

Director of City Plans in consultation with the Director of Current Planning, General Manager of Corporate Services, General Manager of Engineering Services, General Manager of Parks and Recreation, Director of Social Planning, Director of Legal Services, Manager of Housing Centre, and Manager of Real Estate Services

SUBJECT:

Interim City-wide Development Cost Levy By-law: Boundary and Allocation

 

RECOMMENDATION

GENERAL MANAGER'S COMMENTS

CITY MANAGER'S COMMENTS

COUNCIL POLICY

On December 8, 1998, Council approved a Financing Growth Review to address increased demands for City services as a result of new residential and employment growth. On January 28, 1999, Council adopted two types of interim City-wide charges on development, both to remain effective until the Financing Growth Review is completed: a Community Amenity Contribution (CAC) Policy, for privately-initiated rezoning, and a Development Cost Levy (DCL), for new development generally. Specific aspects of the interim City-wide DCL include:

· a 12-month grace period, so that the DCL takes effect for any project receiving a building permit on, or after, January 28, 2000

·A rate of $26.91 per square metre ($2.50 per square foot) for all uses except:

SUMMARY

When Council approved interim City-wide DCLs, they also requested a report back on the City-wide DCL District boundaries and allocation of levy proceeds. Regarding boundaries, the recommended City-wide DCL District boundary (see Figure 1) excludes the seven existing DCL Districts and eight ODP, CD-1, and policy plan areas with public benefit strategies. The basis for this exclusion is that these two sets of areas already have made or are committed to make substantial contributions towards the provision of DCL-type (and other) facilities relating to such development that are equal, or superior, to what the City-wide DCL will provide.

Regarding allocation, before the by-law can be enacted, DCL proceeds must be allocated (by percentages) among DCL-eligible project categories (parks, daycare, replacement housing, and infrastructure). To estimate demand for DCL capital projects a preliminary analysis of projected population and employment growth to 2021 was conducted. This analysis indicates growth-related capital costs approaching $1 billion. If the interim DCL rates were maintained over this 20-25 year period, revenue generated from the interim City-wide DCL would cover approximately 15% of the estimated capital costs.

The recommended allocation for the interim City-wide DCL is based on the averages from existing DCL districts in the city: 54% park; 33% replacement housing; 11% daycare; and 2% engineering infrastructure. While using the pattern of allocation from existing DCL districts is a useful approach for the interim DCL, this is not an indication of actual City-wide costs and allocations. The Financing Growth Review Growth will provide improved capital costs estimates which will provide the basis for modifying the interim DCL allocations. Staff also recommend that the interim City-wide DCL proceeds not be spent pending completion of the full Review, unless Council approves a comprehensive benefit package that commits City-wide DCL proceeds.

PURPOSE

The purpose of this report is to complete interim City-wide DCL implementation by:

· establishing the City-wide DCL District boundary, and
· establishing the allocation of levy proceeds.
Following Council's decision on these matters, the Director of Legal Services will bring forward the City-wide DCL By-law for approval.

BACKGROUND

On December 8, 1998 Council approved a review of the opportunities for financing the costs of growth. The associated report noted that projected population and employment growth will increase demands on infrastructure and facilities, which have significant capital costs.

On January 28, 1999, Council approved implementing interim City-wide CACs and DCLs and established rates and a 12-month DCL grace period (making the DCL effective date January 28, 2000). These policies are to be refined during the broader Financing Growth Review. Prior to enactment of the interim City-wide DCL, Council requested a report back on district boundaries and the allocation of proceeds.

The City-wide DCL boundary required further legal analysis of how to address existing DCL Districts, and ODPs, CD-1s, and policy areas that already have approved public benefit strategies. DCL allocations are necessary before enacting the by-law to allow proceeds to be administered.

DISCUSSION

1. City-wide DCL Boundary

Council policy is to implement DCLs city-wide, subject to addressing areas that already have existing DCL By-laws and public benefit strategies. The recommended City-wide DCL boundary is shown in Figure 1 and contains two sets of excluded areas: (a) the existing DCL districts and (b) the ODP, CD-1, and policy areas with public benefit strategies. These areas will be excluded in the City-wide DCL By-law because the need to provide capital projects in these districts and areas as a result of development has already been addressed by the City. Developers in these areas are already committed to making substantial contributions which provide DCL-type (and other) facilities that are equal, or superior, to what the City-wide DCL will provide.

Figure 1: Recommended Interim City-wide DCL Boundary

Exclusion of Existing DCL Areas

The seven existing DCL districts recommended for exclusion from the City-wide DCL (as shown in Figure 1) provide a range of capital projects which could otherwise be fundable in-part by proceeds from the City-wide DCL. These areas deliver a significantly higher proportion of the capital required from new development than the City-wide DCL. Existing DCL Districts will provide approximately 46% of capital project costs, compared to the estimated 15% of capital costs that the interim City-wide DCL is projected to provide (if kept in place for 25 years at the interim DCL rate).

These existing DCL districts were the product of detailed area planning and needs analysis. Costs for DCL-eligible projects were based on the projected growth and the availability of existing facilities. The DCL rates in each of these areas also considered the economic impact of DCLs on new development. The range of capital projects funded by DCLs varies considerably by area, according to area needs.

Some existing DCL Districts also have accompanying CAC policies which apply to private projects requiring rezoning. As Council can allocate CACs to any purpose, they provide for a wider range of amenities than DCLs. Together, DCLs and CACs generate a higher proportion of facility costs provided by the developer.

Exclusion of ODP, CD-1, and Policy Areas

The eight ODP, CD-1, and policy areas excluded from the City-wide DCL (as shown in Figure 1) have agreements to provide an array of public benefits. These includes both DCL-eligible capital projects and other amenities. These public benefit packages are equal, or superior to what would be achieved by the interim City-wide DCL.

As with existing DCL Districts, these areas undergo extensive area planning, leading to approved planning policies and public benefit strategies. The public benefits are typically provided for as conditions of rezoning enactment and secured through legal agreements. Large projects such as False Creek North and Coal Harbour have provided facilities and infrastructure to meet a variety of City standards including all of the DCL-eligible projects, (parks, daycare, replacement housing, and infrastructure). Other projects have not had the economies of scale to meet full City standards, rather the public benefits provided were matched to the area needs and project economics. However, as noted earlier, in all cases the facilities provided are equal, or superior to, what would be achieved by the interim City-wide DCL.

The exclusion of the ODP, CD-1 and policy areas with public benefit strategies is only appropriate pending build-out of these areas and provision of required public benefits, to meet planned residential and commercial capacity. When existing plans are implemented (all sites and/or units built), new projects would become redevelopment and would be subject to City-wide DCLs. This is similar to conditions in all other parts of the City. An administrative system to track build-out of these areas will be developed. Following build-out, amendment of the City-wide DCL By-law to include these areas would be required, together with an evaluation of appropriate rates.

2. Allocation of DCL Proceeds

Before a DCL By-law can be enacted, Council is required to decide how the proceeds will be spent. Council's decision must be expressed as percentages of the DCL proceeds anticipated. Section 523D of the Vancouver Charter defines DCL- eligible capital projects as:

· park acquisition and development
· daycare facilities
· replacement housing
· infrastructure (streets, water, sewage, drainage).

Future Population, Public Benefit Demands and Costs

As part of determining DCL allocations, estimates are made of future population, the public benefit demands, and the costs of the capital projects to meet these demands. Preliminary background on these has been assembled. As this is an interim City-wide DCL, more detailed work is being undertaken in the Financing Growth Review. The estimates provided in this report should be considered illustrative numbers that substantiate the significant level of capital costs accompanying growth.

Over the next 25 years, the Livable Region Strategic Plan anticipates the region will grow by more than one million people. Vancouver's share could be approximately 121,000 more people and 77,000 more jobs. Of this, 47,000 residents and 77,000 jobs will be in the area of the city covered by the City-wide DCL. The balance will occur in areas with public benefit strategies already in place, such as the major projects and existing DCL areas (which are recommended for exclusion from the City-wide DCL) and in residential projects with less than 4 units which are currently exempt from DCL charges.

Based on this estimated growth in the City-wide DCL area, and using both current City standards and experience from existing DCL areas, preliminary analysis of demand for DCL-eligible projects indicates growth-related capital costs approaching $1 billion. Revenue generated from the interim City-wide DCL will cover approximately 15% of these estimated capital costs if the interim rates are kept in place to 2021.

Recommended Interim Allocation of City-wide DCL Proceeds

Normally, the estimated growth, demands, and costs help determine the specific allocation of DCL proceeds. In this case, for the interim DCL, the demands and costs summarized above are preliminary and not at a great enough level of detail to provide guidance as to specific allocations. Also, as noted above, the DCL will only cover a small portion of eventual growth-related costs. Therefore, staff from all affected departments are recommending that the allocation of interim City-wide DCL proceeds be based on the averages from the seven existing DCL districts in the City, as follows:

· Park Acquisition & Development 54%
· Daycare Facilities 11%
· Replacement Housing 33%
· Infrastructure (streets, water, sewage, drainage) 2%

This is a preliminary allocation for the interim DCL and cannot be taken as indicative or as setting a precedent for the outcome of the full Financing Growth Review. In particular, the low percentage for infrastructure reflects the situation in existing DCL areas which did not require significant transportation or other infrastructure upgrades and/or obtained developer contributions to infrastructure through rezoning, subdivision, or development permit requirements.

Staff also recommend that proceeds collected from interim City-wide DCLs not be assigned to specific capital projects until completion of the full review, except in those cases where Council approves a project-specific, comprehensive benefit package which specifically commits City-wide DCL proceeds. This type of project (e.g. Southeast False Creek) occurs infrequently, but often requires extensive negotiation to secure necessary public benefits, which may include DCL capital projects. Staff believe that outside of these projects, DCL proceeds should not be assigned because priorities for DCL spending have not been established. In practical terms, a relatively small amount of revenue is expected to accrue prior to the conclusion of the broader review. Interim City-wide DCLs do not become effective until January 28, 2000. In addition to the reduced number of building permits being submitted due to the current economic slowdown, projects submitted after the effective date will not require DCL payment until building permit issuance. Some of the larger, more complex projects subject to the City-wide DCL can take longer to process. Staff expect to report back to Council with proposals from the Financing Growth Review in mid 2000.

DCL ADMINISTRATION

In each of the seven existing DCL areas, Council approved a summary appendix to guide administration of the DCL By-law. For the City-wide DCL, this summary is contained in Appendix A. The key policies in this appendix were either already approved by Council on January 28, 1999 (rates, timing) or are recommended for approval in this report (boundaries, allocation).

Additional administrative policies in Appendix A are common to all the City's DCL districts, and generally reflect Charter requirements and the City's legal advice. They address: securing payments, spending proceeds, reconciling payments with the provision of DCL capital projects on-site, and exemptions from DCLs. The exemptions were described in detail in the

January Council report. They include three mandatory exclusions (based on the Charter), plus a discretionary category for exempting repair or renovation work (with no increase in floorspace), which has been applied in most of the City's existing DCL districts. The "renovation" exemption is particularly helpful in preserving heritage buildings. The Financing Growth Review will address the use of "renovation" exemption, especially in cases where there is an accompanying change of use which has higher service demands.

SOCIAL IMPLICATIONS

Application of DCLs City-wide represents a new direction for how the City provides new facilities and infrastructure that address growth. DCL provisions in the Charter direct proceeds from new development to "social" infrastructure, namely daycare and replacement housing, in addition to the typical categories of park and engineering infrastructure. This supports Council's established policies and social objectives for children, affordable housing, and diversity.

PERSONNEL IMPLICATIONS

Personnel implications were addressed in the previous interim City-wide DCL and CAC report (dated January 20, 1999). Staff concluded that, given the down-turn in the economy, existing DCL/CAC staff will be sufficient to administer the interim program. The Financing Growth Review will include assessment of ongoing administrative costs. If, while the review is underway, development activity picks up, staff will report back on additional resources as required.

COMMUNICATION PLAN

Following Council's approval of an interim City-wide DCL and CAC policy, staff undertook a variety of ways to notify the public and development industry, including:

· Signage in the East Wing to advise applicants of the new policy;
· Information Bulletins at reception desks in the East Wing;
· Information on the City's website;
· Notices for development industry newsletters; and
· Notices in development application letters.

Closer to the January 28, 2000 effective date for the City-wide DCL, these and additional ways to notify the public will be implemented.

CONCLUSION

On January 28, 1999 Council approved a policy to implement DCLs City-wide and established the DCL rates and grace period. Council requested a report back to address the DCL boundary and allocation of proceeds. This report recommends establishing a City-wide DCL boundary that excludes existing DCL Districts, and ODP, CD-1 and policy areas with public benefit strategies. It also provides recommendations for interim allocation of DCL proceeds. Council decision on these items will allow the DCL By-law to be prepared for enactment.

As this is a interim City-wide DCL By-law, its primary purpose is to begin the collection of growth-related revenue while the Financing Growth Review is underway. The review will address growth demands and costs in more detail. It will also deliver proposals for refined City-wide DCL rates and allocations. In light of this, staff recommend that the interim City-wide DCL proceeds not be spent pending the outcomes of the broader review.

- - - - -

SUMMARY OF INTERIM CITY-WIDE DCL POLICIES

DEVELOPMENT LEVY DISTRICT

(a) The boundaries of the Development Cost Levy District should be as illustrated below.

Figure 1. Recommended Interim City-wide DCL Area Boundary

RATES

(b) DCLs will be collected at a rate of $26.91/m² ($2.50/sq.ft.).

REDUCED RATES

(c) Establish a rate of $10.76/m² ($1.00/sq.ft.) for non-residential uses in industrial zones.

(d) Establish a rate of $5.49/m² ($0.51/sq.ft.) for daycare and school use.

RATE ADJUSTMENTS

(e) Rate adjustments will be based on the outcomes of the Financing Growth Review.

Appendix A
Page 2 of 2

EXEMPTIONS

(f) Exempt renovations defined as "changes to an existing building not involving additional floor space."

(g) Exempt social housing defined as "housing which is built on land owned by the Federal, Provincial, or City government, cooperative housing group or non-profit society and which is in receipt of government shelter subsidy where at least 30% of the units are occupied by core-need residents."

(h) Exempt buildings which will contain three or fewer dwelling units which are put to no use other than residential.

(i) Exempt churches which have tax-exempt status.

SECURING PAYMENTS

(j) Permit payment of DCLs by instalment, with $100 due prior to issuance of a building permit, the remainder due upon issuance of an occupancy permit, to be secured by an irrevocable letter of credit.

SPENDING OF PROCEEDS

(k) Require that DCL proceeds be spent within the levy district such that they relate to levied projects either directly or indirectly, except for replacement housing which can be spent anywhere in the City.

RECONCILING DCLs WITH ON-SITE PROVISION OF PROJECTS

(l) DCL payments are required prior-to building permit issuance. In limited cases where new development provides DCL-eligible capital projects at their own expense, the City may contribute DCL proceeds toward the cost of such projects, based on prior approval of City Council. However such arrangements can not be in lieu of payment of DCLs.

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