Developers in Alberta face the prospect of losing significant bargaining power in determining off-site levies. The proposed Off-Site Levies Regulation replaces a municipality's obligation to negotiate levies in good faith with the much weaker obligation to consult. The Off-Site Levies Regulation will also shift the shared responsibility between the municipality and developers for defining existing and future infrastructure requirements to being the municipality's sole responsibility.
Negotiate vs Consult
In the parlance of public participation, "consult" means the municipality will keep developers informed, acknowledge their concerns, and provide feedback on how those concerns influenced the municipality's decision. However, the municipality is under no obligation to work with developers to incorporate their concerns into the determination of off-site levies. The Off-Site Levies Regulation (the "New Reg") incorporates a new section entitled "Consultation" that details this lesser level of public engagement.
Under section 3(1) of the Principles and Criteria for Off-Site Levies Regulation (the "Old Reg"):
In determining the levy costs, the municipality is to retain the flexibility to negotiate the levy in good faith and in a manner that recognizes the unique or special circumstances of the municipality.
"Negotiate" in the spectrum of public engagement is closer to "collaborate", which means the municipality would look to developers for advice and incorporate that advice into the determination of off-site levies to the maximum extent possible. Losing the right to negotiate levy costs is a significant loss for developers.
No Longer a Shared Responsibility
The Old Reg (Section 3(3)) contains another clear example of collaborative language that the New Reg does away with:
There is a shared responsibility between the municipality and developers for addressing and defining existing and future infrastructure requirements ...
The New Reg (section 3(3)) replaces this shared responsibility with a singular responsibility: "The municipality is responsible for addressing and defining existing and future infrastructure and facility requirements." Losing the right to share in defining infrastructure requirements is a significant loss for developers.
Benefitting Areas and Degree of Benefit
Both Old Reg and New Reg contain this similarly worded provision:
All beneficiaries of development are to be given the opportunity to participate in the cost of providing and installing infrastructure and facilities in the municipality on an equitable basis related to the degree of benefit.
The Province had the opportunity in its lengthy review of the Municipal Government Act ("MGA") and regulations to provide direction to municipalities on determining who benefits and to what degree. Unfortunately, the New Reg simply reiterates the language from the Old Reg. Both are live issues. The City of Calgary, for example, defines the benefitting area for all infrastructure subject to off-site levies (with the exception of storm water infrastructure) to be city-wide. Accordingly, off-site levies paid by a developer in the city's southeast quadrant could be used to fund infrastructure in the northwest. Rocky View County's proposed transportation off-site levy bylaw, the hearing of which has been deferred, proposes to define the benefitting area as the entire county. While this system is administratively easier for the municipality and allows for consistency of levy amounts, it could be difficult to establish the test of benefit for off-site infrastructure that is nowhere proximate to the development for which levies are imposed.
A developer's proportionate share of an off-site levy is typically calculated using the basic formula of the ratio of the area of the developer's lands to the aggregate area of those lands determined to be within the benefitting area for that piece of off-site infrastructure. This formula works well for greenfield residential development, for example, where the intent is to maximize subdivision and development potential for each parcel within a benefitting area. However, the formula is arguably punitive for a developer that, for example, triggers the obligation to pay off-site levies by submitting a development permit for a minor expansion to an existing facility. For this developer, the typical formula is arguably inequitable and does not reflect the degree of benefit to its lands. Being able to challenge an off-site levy on the basis of equity and degree of benefit, without more direction in the New Reg about how these principles should be applied, creates uncertainty of repayment for off-site infrastructure for not only municipalities but for "first-in" developers that have front-ended the cost of such infrastructure and are looking to subsequent developers for repayment.
Establishing Base Standards for Facilities
The New Reg has added the following provision:
The municipality has the discretion to establish service levels, minimum building and base standards for the proposed facilities.
In isolation this provision seems relatively benign – of course a municipality should have this discretion. However, in the context where stakeholder input from developers has been denigrated from "negotiate" or "collaborate" to "consult", the result is that it will become even more difficult for developers to influence the determination of base standards for fire halls or regional recreational facilities, for example.
Developers in Calgary, who are accustomed to paying a "voluntary levy" for this type of infrastructure (fire halls, police stations, libraries, recreation facilities), have consistently advocated for more modest base standards for fire halls, the cost of which can be a barrier to development. With this category of infrastructure now being enshrined in the Modernized Municipal Government Act, municipalities throughout the province have been given the power to impose this community services levy. Developers throughout the province now face the prospect of paying an additional levy – which in Calgary is currently $78,850 per hectare for its community services charge – while having their bargaining power significantly eroded.
A Bit of History
The last time the MGA was amended to add a new category of infrastructure to off-site levies was December 2003. At that time, section 648 of the MGA was amended to allow an off-site levy for "new or expanded roads required for or impacted by a subdivision or development". Concurrently, and as a result of effective advocacy by the development industry, the MGA was amended to allow the government to make regulations, "governing the principles and criteria that must be applied by a municipality when establishing an off-site levy". The Principles and Criteria for Off-Site Levies Regulation came into force in March 2004. Fred Laux, QC, in his Planning Law and Practice in Alberta, states that:
When the roadway levies were included in sec. 648, a corresponding regulation was passed to impose some duties and obligations on councils relative to the process for arriving at and setting the amounts of levies to be imposed.
(Frederick A Laux, Planning Law and Practice in Alberta (Edmonton: Juriliber Limited, 2001) (loose-leave updated 2013, revision 3) ch 14 at 39.)
The New Reg represents a significant retrenchment of a municipality's duties and obligations to meaningfully engage with the development industry to determine the scope and cost of off-site levies.
Not All Bad News for Developers
Sections 9 and 10 of the New Reg could be an improvement to the current process for challenging a municipal off-site levy bylaw. Instead of having to apply to the Court of Queen's Bench for judicial review, an off-site levy bylaw may be appealed to the Municipal Government Board ("MGB") within 30 days of the off-site levy bylaw being passed. The MGB could provide a forum for appeals that is less formal, less expensive, and with panels that have more experience with development-related issues.
Comment Period on new Reg Ends September 22
The Government of Alberta published a draft of the New Reg as part of what it calls the Group 2 Regulations, and invited public comment until September 22, 2017. For ease of reference, the link to the Government's website can be found here, which contains information on how to provide comments on the New Reg.
City Charters Regulation – Henry VIII Revisited
Stay tuned for our blog post on the draft City Charters Regulation, where we comment on this unprecedented delegation of provincial legislative powers.
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