Transportation Off-site Levies (TOL)
The following is a letter by Janet Ballantyne addressed to all members of Council and some of Administration highlighting all the flaws of the TOL. Whether the County will proceed with this issue on September 12th remains to be seen, however, as drafted they are against the law. For a more condensed version of this letter, click here.
I am writing to express my concerns with the revised Transportation Off-site Levy (TOL) bylaw. When Council considers the proposed new bylaw at its meeting on September 12th, you must be aware that it has what appear to be insurmountable flaws that seriously challenge its underlying legality.
These flaws exist in the current bylaw structure. However, the old bylaw’s low rates relative to those in neighbouring municipalities meant that major developers had no incentive to rock the boat and small landowners have found court challenges to be cost-prohibitive. Now that the proposed rates will be significantly higher, the risk of a legal challenge will increase significantly.
It is completely inappropriate for Council to knowingly approve a bylaw that does not comply with the legal requirements set out by the province and confirmed in court challenges to other municipalities’ off-site levy structures. I raised these concerns with staff in March 2017. I had hoped that the revised TOL bylaw would have been restructured to acknowledge these legal constraints. Staff assured me that County solicitors would review the proposed amendments to ensure they align with provincial regulations. Unfortunately, this does not appear to have been done.
I strongly urge all Councillors to request advice from the County’s lawyers explaining how the proposed amendments to Rocky View’s TOL bylaw meet the legal tests provided in the Regulations and in the relevant Court of Appeals decision.
Details of Legal Concerns
Regulation 48/2004: Principles and Criteria for Off-Site Levies Regulation provides detailed guidance for how municipalities are to structure off-site levies under the MGA. Section 3(3) of those Regulations, states that “all beneficiaries of development are to be given the opportunity to participate in the cost ... on an equitable basis related to the degree of benefit.” The Regulations also stipulate in Section 3(5) that “there is to be a correlation between the levy and the impacts of the new development”.
Okotok’s off-site bylaw, which had been structured in the same manner as Rocky View’s, was challenged in court. Okotoks lost the legal challenge. Subsequently, almost all Alberta municipalities have restructured their off-site bylaws to reflect the unanimous Court of Appeals decision. Rocky View has not.
The core of the Court of Appeals decision was that “the Town is not entitled to offload the whole of the costs of new or expanded off-site infrastructure and facilities upon a developer, in circumstances where it is reasonable to suppose that existing residents will share in the benefit.” The Court of Appeals decision goes on to conclude that “a municipality is not entitled to allocate the whole of the offsite costs of new or expanded infrastructure or facilities upon new development, unless it can be reasonably supposed that the existing residents derive no benefit therefrom.” (Prairie Communications Development Corp. v. Okotoks, 2011 ABCA 315, pg. 19)
The Court of Appeals decision also examined the situation in which new infrastructure would not have been needed except for the new development. The Court concluded that “the issue is benefit, not necessarily what prompted obtaining the benefit. … If existing residents derive such benefits, then they should contribute to the costs of the new development whether or not occasioned by new development. It is the responsibility of the municipality enacting an off-site bylaw to address the issue of the respective degree of benefit between existing residents and new development, and allocate the costs in a reasonable and responsible manner. In addition, it must include this allocation in the bylaw.” (pg 19)
The Court of Appeal decision also clearly confirms that “The Regulation mandates a sharing of cost based on the benefits obtained. Most importantly, there must be a correlation between the levy and the impacts of the development.” (pg. 17)
It is difficult to draw any conclusion from the regulations and the subsequent Court of Appeals decision other than that new development cannot be required to pay 100% of the costs of new or upgraded infrastructure unless it can be demonstrated that the only beneficiaries of that infrastructure will be residents of the new development.
Other municipalities have clearly reached this conclusion as is evidenced by the fact that they have amended their off-site bylaws to allocate only portions of the costs of new infrastructure to new development. Rocky View’s TOL bylaw continues to state that 100% of costs will be borne by subdivision and development (Schedule A, para. 7).
Why Rocky View’s TOL Fails to Meet the Legal Standards
Rocky View’s TOL bylaw has three fundamental design problems each of which raises questions about its compliance with the provincial Regulation governing how municipal off-site levies are to be structured. These are:
Including 100% of the costs for transportation upgrades onto new development ignores the reality that existing residents will obtain benefits from at least some of these upgrades.
Basing the levy on a per acre charge does not provide any correlation between the benefits received / cost imposed on the County’s transportation network by development of varying densities.
Shifting from the special area levies, which had imposed additional levies in defined geographic areas of the County, to a County-wide incremental levy weakens any correlation between benefits received and the levy rate charged.
Allocating benefits from transportation upgrades between existing and new residents
As mentioned earlier, Rocky View includes 100% of the costs of new and upgraded transportation infrastructure in its TOL calculations. Many of the upgrades to Rocky View’s long-range transportation network will provide benefits to existing residents who drive on County roads on a regular basis. As a result, Provincial Regulation 48/2004: Principles and Criteria for Off-Site Levies Regulation clearly requires the benefits from these upgrades to be allocated between existing residents and new development.
As an active member of a residents’ advocacy group, I am reluctant to suggest imposing additional financial burdens onto existing residents. However, the legal constraints are unambiguous. I believe that Council should have acknowledged this reality long ago and might then have exercised greater due diligence in their development approvals. Had Council acknowledged that these approvals will have a greater impact on existing residents’ property tax rates, one can at least hope that some of them might have been examined more critically.
Relying on the fact that Rocky View’s levy structure has not yet been challenged is no excuse to continue to ignore the reality that the County’s levy structure does not comply with the legal requirements for such levies. In the past, the low levy rates in Rocky View relative to its neighbouring municipalities have provided a strong disincentive for major developers to rock the boat.
The County appears to have attempted to dissipate this risk by removing local and collector roads from the transportation network expenditures to be recovered from TOLs and by replacing the specialized area levies with an incremental charge across the entire County. These changes do reduce the total TOL charge per acre relative to the earlier proposal. This may be sufficient to quiet the objections from major developers. However, the legal flaws are still there. It is unconscionable that Council would knowingly approve a bylaw that is so clearly contrary to the legal requirements set out by the province.
Per Acre Basis for TOL Lacks Correlation with Benefits Received
Rocky View’s TOL is based on the number of acres being subdivided. In municipalities where most, if not all, subdivisions result in new developments with relatively comparable densities, this approach may produce a reasonably equitable allocation of the off-site infrastructure costs as is required under the Regulation’s Section 3(3). However, in Rocky View there is a high degree of variability in post-subdivision densities. As a result, basing the levy on the number of acres being subdivided does not result in an equitable allocation of costs relative to the benefits received.
For example, the subdivision of 20 acres into five-acre parcels does not impose as much demand on the transportation network as does the subdivision of the same 20 acres into one or two-acre parcels. Yet, the same TOL applies to all these subdivisions.
The per acre rate structure is heavily biased in favour of major developments to the disadvantage of smaller scale subdivisions and those undertaken by smaller landowners. The cost per resulting parcel is dramatically higher when the same parcel is subdivided into fewer end parcels The provincial regulations require that there is a correlation between the levy charged and the impact of the new development. The correlation for Rocky View’s TOL is, at best, very weak.
To properly reflect the costs being imposed on the County’s infrastructure and the share of benefits being received by residents of the subsequent subdivisions, the TOL must be levied on a basis that more accurately reflects the costs imposed and the benefits received by the resulting subdivision. For residential subdivisions, basing the TOL on a “per door” charge or on the number of new parcels created would meet the regulatory requirements since it would provide a correlation between the levy charged and the impact from the new development.
Staff appear to have rejected this approach because of purported difficulties adapting a per door or per parcel approach to commercial and/or industrial development. This is akin to throwing the baby out with the bath water. There are alternatives. Basing the TOL on traffic impact assessments is an obvious alternative. All commercial and industrial development applications have to provide traffic impact assessments. Large-scale residential development applications also have to provide traffic impact assessments. Rules of thumb could be developed for small scale residential subdivisions that created only a few incremental parcels.
Until the County finds a basis for calculating its TOL that is more closely correlated to the benefits received by the resulting development its TOL will continue to face the real risk of legal challenge from landowners undertaking smaller scale subdivisions.
Change to Special Area Levies Further Weakens Correlation between TOL & Benefits Received
The replacement of the special area levies with one County-wide specialized levy is also completely inconsistent with the regulatory guidelines. The regulations clearly expect the municipality to identify the “benefiting areas” as part of its off-site levy calculations (Sec. 9(b)).
There are serious inequities in the existing special area levies, but they had at least attempted to identify the areas that benefited from upgrades to the transportation network and charge incremental levies accordingly. Their problem was, not that they existed, but that they did a poor job of providing a strong correlation between the benefits to be received from the upgraded elements of the transportation network and the area over which they were charged.
In some instances, special area upgrades will provide a significant portion of their benefits to existing residents and, as a result, should have their costs shared between new development and general municipal revenues. In other cases, the Range Road 34 flyover for Harmony is the most glaring example, the benefits from the upgrade will accrue to a much smaller group (residents of Harmony) and, as a result, should have only been charged against subdivisions within that area.
The County’s proposed amendments which will replace the special area levies with a “specialized levy” ignores the County’s responsibilities to design its TOL in accordance with the regulatory requirements. It fails to identify the “benefiting areas” for the upgrades and it fails to determine any relationship between the benefits that will be received by new development and existing residents.
Simply arguing that all existing and new County residents will benefit from the transportation upgrades included in the specialized levy calculation is an abdication of municipal responsibility. As the Court of Appeal concluded, municipalities have the responsibility to “allocate the costs in a reasonable and responsible manner.”
In closing, there were some significant flaws in the way in which the County has conducted its public consultations on the proposed revisions to the Transportation Off-site Levy Bylaw.
Both rounds of consultations with residents have occurred at peak vacation times. I understand that County business must go on regardless of peoples’ vacation schedules. However, to schedule consultation on both the initial amendments and then the revised amendments during subsequent summers should not be acceptable to you as Councillors.
As well, when the revised amendments were released earlier this year, people were given the clear impression that there would be an opportunity for them to comment and have those comments considered by staff before a final version of the amendments came to Council for its consideration. That has not happened
This is a sufficiently important issue for many people that it was inappropriate to eliminate their ability to have this opportunity to provide feedback on the amendments, especially given that there were substantive changes between the initial and the revised amendments.
People had also been led to believe through both consultation periods that when the TOL amendments came before Council they would be presented in a public hearing format. I realize that changes to off-site levy bylaws do not require public hearings under the MGA. But, there was nothing stopping Rocky View from holding a non-statutory public hearing on its proposed amendments to the Transportation Off-site Levies, as was done by the Town of Cochrane, for example.
To mitigate this, I sincerely hope that Council will be willing to hear from interested residents when it considers these bylaw amendments on September 12th.