Wednesday, September 4, 2019

Development Cost Charges: When growth doesn’t pay for growth

Yesterday, I posted about municipal finances and that municipalities in our province have reserve accounts that can be used to pay for things such as upgrading roads, sewers, parks, and the like. In Langley City, we had $34.9 million in reserve accounts at the end of 2018. For a more detailed look at how these accounts are used, please read my previous post. Municipalities also have another special reserve account which I didn’t post about yesterday: Development Cost Charges.

Since the 1950s, there was an understanding that new development projects in a municipality should pay for the services required to support them. Services can include upgraded roads, water lines, sewer mains, and/or park space. Various programs where tried, but the current system of Development Cost Charges was put in place at the end of the 1970s.

While Development Cost Charges are an important funding mechanism for local governments in BC, there are some challenges with the implementation Development Cost Charges.

In BC, the provincial government can technically do whatever it wants to municipalities. The tradition has been very hands-off when it comes to the province intervening in municipal matters. This means that municipalities have a high degree of autonomy when it come to finances.

For example, councils generally work with municipal staff annually to approve projects such as upgrading roads or building a new performing arts centre, and determine how these projects will be paid for.

Development Cost Charges are different. The provincial government must approve every project that will be funded by a Development Cost Charge; municipalities must create a bylaw for these projects for provincial approval.

Generally, Development Cost Charges can be used to widen roads, build bicycle infrastructure, build sidewalks, build water mains, build storm water mains, build sewer mains, and to acquire and improve parkland. This seems simple, but it is not.

The rules for what projects in these categories are eligible for Development Cost Charge funding is very complex. In fact, a 116-page guide is available from the provincial government on Development Cost Charge implementation.

An example of the complexity is that funding collected by Development Cost Charges can be used to build a washroom in a park, but can’t be used to build a spray park. A baseball diamond could be funding by a Development Cost Charge, but a tennis court could not.

Development Cost Charges are geared towards communities that are building new neighbourhoods, and not for communities like Langley City where redevelop is occurring. This means that in Langley City, projects which should be paid for by Development Cost Charges, can end up being paid for by general revenue from existing residents.

Langley City and other municipalities in BC are advocating to the provincial government to make the Development Cost Charge program less restrictive, especially when considering redevelopment.

At the end of 2018, Langley City had $17.6 million in restrict Development Cost Charge reserves.


Leigh Castron said...

Where does the money for the Development Cost Charges come from? Why does the provincial government have a say over how it gets used?

Nathan Pachal said...

It is collected from a developer when a project receives a building permit.

The province has a say because they setup the legislation which enables municipalities to collect the Development Cost Charges.