A plan going before council’s executive committee next month would see charges on the average new two-bedroom condo rise to $23,036 next year, from $12,412 now.
The city’s consultant says in a report that at least part of the cost is passed on to the buyer of the new home.
The proposed higher rates would come closer to those charged by the municipalities bordering Toronto — which average about $32,000 per unit — and increase Toronto’s overall annual take from the charges to $260 million from $150 million.
Developers note that Toronto is the only municipality to charge a municipal land transfer tax. That tax contributes about $350 million a year to city coffers, while adding about $10,000 to the cost of an average home.
One-time development charges are imposed on new buildings to help pay for roads, water, transit and other upgrades needed to service the new growth.
The size of the proposed increases could crimp the downtown condo construction boom that in turn is spurring highly desirable office development, developer Stephen Diamond said Tuesday.
Diamond said office development has returned to downtown over the past five years after a long drought, and it’s related to the increase in workers living downtown.
“Obviously, the labour force is located here, so people are building new office buildings,” Diamond said. “And new office buildings are the largest source of employment and property tax generators in the city.”
Hemson Consulting, the city’s property tax consultants, said approving an increase in charges on condos won’t curb residential construction during a strong housing market.
Toronto has been enjoying a residential boom, and staff believe now is the time to set a “proper amount” for development charges, said Deputy Mayor Doug Holyday.
“Traditionally, you might moderate your development charges to try to encourage development, but we don’t seem to be having that problem at this time,” Holyday said. “There’s a lot of development going on.”
He noted that former mayor David Miller cushioned the blow of the new land transfer tax by freezing development charges for two years and then phasing in increases.
“At that time, they decided to give the development industry a bit of a break, and now I guess the chickens are coming home to roost on that,” Holyday said.
“I don’t know if these exact amounts will carry, but I think there’s probably an appetite (on council) for an increase.”
Mayor Rob Ford has railed against charges levied on developers under Section 37 of the Planning Act, where developers pay more on any increase in the building’s size over what’s allowed.
But Ford has said little about development charges which are levied on all new construction, including commercial and industrial buildings.
Even at the new rates, the city would only be charging enough to pay 70 per cent of the cost of new infrastructure needed by the new development, the staff report said.
“They’re only moving toward cost recovery,” said former budget chief David Soknacki. “It’s the beginning of a brave new world that ought to have existed years ago.”
Soknacki said development charges are a key way to fund new capital works that otherwise might not get built because councillors wouldn’t want to raise property taxes to pay for it.
“Unless you’re setting the money aside, it’s not going to get built because council is not going to raise taxes for it.”
Soknacki said the city could agree to phase in increases over time to soften the blow on developers and avoid an appeal to the Ontario Municipal Board.
Diamond said he hopes the city will sit down with the industry and negotiate a deal this fall that both sides can live with.
“There’s room for some potential increase, but I think the suggestion to double it in one year is being penny-wise and pound-foolish.”
Original Article
Source: thestar.com
Author: Paul Moloney
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