The revised off-site levy bylaws are on Council’s June 9th. The majority on Council believes that levy costs are a significant deterrent to new development in Rocky View and expect that lowering levies will attract new development to Rocky View. As a result, the levies propose concessions for new development – a choice that appears to ignore the County’s supposed commitment to the principle that growth pays for growth.
At its December 9, 2019 meeting, despite the reminder from the CAO that there are only two sources to pay for infrastructure – levies and general property tax revenue – Council directed Administration to structure the revised off-site levies in ways that shift over $700 million in costs of new development from levies to general tax revenues. While we understand the temptation to provide breaks in the current economic conditions, the resulting shortfall will be paid by all ratepayers rather than by those directly benefiting from the new infrastructure.
For those of you not familiar with off-site levies, they are charges paid when property is subdivided and are intended to cover the costs of new infrastructure required because of growth. Rocky View’s off-site levies cover transportation, storm water and water/wastewater infrastructure. They are called “off-site” levies because they relate to infrastructure “off” the site of the new development required to support that development – for example, upgraded roads to support increased traffic.
Attracting new development
Rocky View’s councils have maintained for years that attracting commercial and industrial development is important because the property taxes paid by these ratepayers exceed the costs of their ongoing servicing requirements. This allows the County to use excess non-residential property tax revenue to cover the costs of servicing residential ratepayers whose property taxes are said to not cover the full costs of the servicing they require.
However true that might be, there are limits to also using this assertion as the “rationale” for setting off-site levy rates too low to recoup the costs of incremental infrastructure needed because of new growth. If surplus non-residential property tax revenue is used to cover the shortfall between property tax revenues and servicing costs for residential properties, that surplus cannot also be used to cover shortfalls in the collection of levies – the same dollar cannot be used more than once. There needs to be enough surplus to cover the levy shortfall as well to meet the “growth pays for growth” principle. To date, the County has provided no information to support the existence of enough “surplus” non-residential property tax revenue to fund both. As a result, we are concerned that those who have lived and/or operated businesses in Rocky View for years are ending up subsidizing those who may come in the future.
Transportation Off-Site Levies (TOL)
One of the clear messages from the public consultations on the TOL was that there needed to be a stronger correlation between the levy and the benefits received from incremental road infrastructure. The new TOL reflects this in some of its changes:
· It includes an exemption for the “parent” parcel in a subdivision – the post-subdivision parcel that retains an existing dwelling.
· The costs of “background” growth in demand for road upgrades are now excluded.
· The calculations are now based on a somewhat more realistic estimate of how much land will be developed. The existing TOL assumed that almost 60% (591,000 acres) of Rocky View’s land was developable. The new TOL is based on ASPs and approved conceptual schemes – about 127,000 acres.
· The new TOL is designed to have differential rates for higher density residential and commercial development (the “urban” base levy) versus lower density (2-acre parcels or larger) residential development (the “rural” base levy). The existing TOL had one base levy rate for all properties. Denser residential development and commercial/industrial development require more incremental infrastructure, so a higher rate makes sense.
Based on direction from Council, the TOL bylaw at the June 9th public hearing ignores the differential rates and freezes the base levy rate at $4,595/acre for all property. While this may sound like good news, freezing the rural rate at $4,595/acre was only possible because of the proposed higher $14,701/acre urban rate. Without a higher urban rate, the County will only collect $585 million – less than half the $1.2 billion needed for the long-range transportation network. As structured, the TOL bylaw provides a subsidy of $605 million from existing ratepayers to attract new development to the County.
Council also directed that the new TOL bylaw should collect 12½% rather than 25% for the County’s share of provincial road upgrades. This reduces most of the special area levy rates. However, it is not clear where the remainder for these upgrades come from.
Storm Water Off-Site Levies
The storm water off-site levies were introduced in 2016 to pay for the Cooperative Stormwater Management Initiative (CSMI) regional storm water ditch that will address ongoing drainage problems that have limited development potential in parts of east Rocky View. CSMI supports the master drainage plans in the Langdon, Conrich, Janet, and Omni ASPs to facilitate development in those areas.
The 2016 stormwater off-site levy only included the CSMI system itself, not the costs for shared infrastructure in each area needed to connect to the regional drainage ditch. Given the reality that infrastructure has to be built to connect each area to the CSMI system, revisions to the storm water off-site levy included a base levy for the $57.1 million cost of the CSMI system itself and special area levies for the $91.4 million costs of the infrastructure needed in the ASPs to connect them to the CSMI system.
To keep levy rates down in the ASP areas, Council directed that the special area levies be removed, except in Langdon. However, the connecting infrastructure will still need to be built – otherwise, why construct the CSMI system. As a result, it appears that the $83.6 million for connecting infrastructure in the Conrich, Janet and Omni ASPs will be another subsidy from existing ratepayers to potential future new development.
Water / Wastewater Off-Site Levies
There are no significant changes to the water / wastewater off-site levy structure. However, these levies are a cautionary illustration of what happens when levies do not recover the cost of the incremental infrastructure. The risk associated with the upfront investment is shifted from the landowners who develop the land to the ratepayers.
When the initial investments were made in the east Rocky View water and wastewater systems in the early 2000s, ratepayers were assured that the debt would be repaid within the following decade. The argument was “build it and development will come”. Unfortunately, not enough new development came and by 2013 only $32.2 million had been collected in levies against the original $135.1 million investment. Since then, a bit more than $25 million has been collected in levies. This leaves the County with $42.7 million in outstanding external debt and $34.7 million owing to the Tax Stabilization Reserve.
These amounts continue to be included in the levy calculations and will, theoretically, be repaid from future levy payments. However, it is getting harder to see how or when this will happen when almost half of the levies collected to date have been eaten up by accumulating interest. This skepticism is heightened by the fact that the levies also include $123.5 million in water and wastewater upgrade costs. Given that the levies have so far failed to repay the initial capital investments, how can they be expected to also recover almost as much again in upgrade costs?
Rocky View Forward has always maintained that growth should be responsible – that it should pay for itself. Existing ratepayers should not be expected to subsidize the costs of attracting new development to the County. Off-site levies allow municipalities to ensure that the costs incurred because of new development are paid for by that development.
Council’s Strategic Plan emphasizes maintaining the County’s financial health, ensuring responsible growth, and enhancing transparency. However, instead of revising the off-site levies so they recoup the costs of growth from those undertaking the growth, the bylaws at the June 9th public hearings will result in existing ratepayers subsidizing new development by over $700 million – $605 million from not implementing the differential TOL rate for higher density residential and non-residential development; $84 million from excluding necessary connecting infrastructure in the Conrich, Janet and Omni ASPs from the storm water off-site levy, and $35 million now owed to the Tax Stabilization Reserve because of shortfalls in past water/wastewater off-site levy collections.