Toronto’s Growth Funding Exercise: Proposed Community Benefits Charge By-law, Development Charges By-law and Parkland Dedication Planning Instruments Released
|Lawyer||David Bronskill, Robert Howe, Max Laskin|
|Area||Municipal, Planning and Property Tax|
On April 12, 2022, the City of Toronto released a series of documents outlining staff’s proposed approach to the City’s first community benefits charge (CBC) by-law, a new development charges (DCs) by-law and a new parkland dedication by-law. These proposed instruments come in response to legislative changes in Bill 108 and Bill 197, outlined in our previous Updates,1 which effectively require municipalities to update their by-laws relating to growth funding matters by September 18, 2022, or else lose certain sources of funding. Together, the City’s proposed growth funding tools would impose significant obligations on those seeking to develop land.
As outlined further below, the City’s proposed instruments provide for a CBC at the maximum allowable rate of 4% of land value and significant increases in DCs of up to approximately 49% relative to existing DC rates. In addition, the City’s new proposed parkland dedication by-law would replace the current maximum parkland dedication and cash-in-lieu rates based on land area with new maximums based on density, ranging from 15% to 25% of the development site area.
City staff have indicated the proposed instruments are planned to go to the Planning and Housing Committee for consideration in May 2022 and then to City Council in June 2022. However, enactment of the instruments may follow at subsequent Council meetings. Further, as discussed below, the City has proposed some transition provisions for the new caps on parkland dedication and has indicated the new DC rates may be phased in. Once approved, each of the proposed instruments would be subject to appeal to the Ontario Land Tribunal (the “Tribunal”).
Proposed CBC By-law
As outlined in our previous Updates, the CBC is a new charge that replaces traditional contributions towards community benefits under section 37 of the Planning Act. Under the Planning Act as now amended, CBCs can be imposed to pay for the capital costs of facilities, services and matters required because of development or redevelopment. The amount of the charge is currently capped by provincial regulation at 4% of the value of the land to be developed as of the day before the first building permit is issued.
As required under the Planning Act, the City is preparing a Community Benefits Charge Strategy (the “CBC Strategy”) to inform its CBC by-law. The key components of the City’s proposed approach to CBCs based on the draft CBC Strategy and draft CBC by-law released for consultation include the following:
- Maximum amount (4%) to be charged. The draft CBC Strategy indicates that the estimated growth-related capital costs the City expects to incur exceeds the amount of revenue available through CBCs. Accordingly, the City proposes to levy CBCs based on 4% of land value, in accordance with the current prescribed maximum.
- Timing of CBC determination. The CBC is calculated based on 4% of the value of the land to be developed as of the day before first building permit issuance. However, the draft CBC by-law provides that if development is to be constructed in phases, a CBC will be payable for each phase of development based on 4% of the value of the land of the subject phase as of the day before the first building permit is issued for that phase.
- Eligible facilities, services and matters. The City proposes to use CBC funds collected to fund capital costs associated with parks, community facilities, affordable housing, public realm, active and sustainable transportation, protective services (e.g. ambulance services), waste management, and civic administration associated with implementing and administering the City’s CBC program.
- City-wide application. A single CBC by-law is proposed to apply City-wide, with the payment of CBCs required for development in all geographic areas.
- Only minimum legislated exemptions proposed. The draft CBC by-law only provides the minimum exemptions required under the Planning Act, such that only developments less than 5 storeys in height or which add less than 10 residential units would be exempt. Notably, this means that non-residential development would not be required to pay CBCs. However, the draft CBC by-law does not include any exemptions for smaller residential buildings based on gross floor area, in contrast to the City’s current policies pertaining to section 37. This means that projects that would have been exempt from section 37 contributions on the basis that they provide less than 10,000 square metres of gross floor area would be subject to CBCs under the City’s proposed by-law. This could have significant implications for mid-rise projects across the City, including those which recently achieved site-specific zoning on the assumption that no additional financial contribution would be required for community benefits.
- In-kind contributions permitted. As permitted in the Planning Act, the draft CBC by-law provides that Council may allow for in-kind contributions to be provided in lieu of CBCs otherwise payable. Under the Planning Act, the City identifies the value attributable to the in-kind contributions for the purposes of deducting the corresponding amount from the CBCs otherwise payable.
- Effective date. While the Planning Act permits municipalities to provide that their CBC by-law comes into effect on a different date, the CBC by-law is proposed to come into effect on the date it is passed.
While the CBC payable in respect of each particular development is based on 4% of the value of the land being developed determined by a site-specific appraisal as of the day before first building permit issuance, the CBC Strategy includes the following estimates of the average CBC the City would collect based on current land values (which not surprisingly vary by geographic area):
||Average Estimated CBC Rate (per unit)|
The draft CBC by-law does not include any transition provisions to supplement those in the Planning Act. As outlined in previous Updates, the Planning Act provides that the existing section 37 regime would continue to apply to (i) those projects which have a by-law containing section 37 provisions passed before the day the City passes its CBC by-law (which would likely include a by-law approved by order of the Tribunal), and (ii) the lands that are the subject of such a by-law.
Given the transition scheme outlined above, the date on which Council passes the CBC by-law is critical. Materials released to date indicate that the CBC by-law (as well as the DC and parkland by-laws summarized below) will be considered by Council at its meeting commencing on June 15, 2022. However, even if Council approves the content of the by-law on that date, the actual passage of the CBC by-law could be delayed until a subsequent Council meeting, provided that it occurs prior to September 18, 2022. Council’s last two scheduled meetings before the election break are on July 19-20 and August 15, 2022.
Once enacted, any person or public body would be permitted to appeal the City’s CBC by-law to the Tribunal. If the Tribunal repeals or amends the CBC by-law through the appeal, such repeal or amendment is deemed to come into force on the day the by-law as enacted would have come into force (absent an appeal). Further, the municipality is required to refund any CBCs previously paid that would not have been payable under the CBC by-law as repealed or amended, plus interest.
Proposed DC By-law
Under the Development Charges Act, 1997 (the “DC Act”), DC by-laws expire after five years, thereby effectively requiring municipalities to enact a new DC by-law at least every five years. Even though the City’s current DC by-law was enacted on May 1, 2018, and therefore expires on May 1, 2023, the City has advanced a new DC by-law and associated background study in response to the legislative changes in Bill 197. As outlined in our July 13, 2020 Update, Ontario Rethinks Proposed Community Benefits Charges and Changes to Parkland Dedication Development Charges, Bill 197 modified the services eligible for funding through DCs and eliminated a legislated 10% discount for soft services, among other things.
The draft DC background study released for consultation (the “Draft Background Study”) is based on anticipated increases of 430,000 people and 185,000 employees in Toronto by 2041. It estimates $22.5 billion in capital costs over that 20-year period attributable to such growth. On this basis, the Draft Background Study recommends, and the associated draft DC by-law proposes, significant increases in DCs of approximately 49% for residential forms of development and 40% for non-residential forms of development, as summarized in the following table:
|Development Type||Current Rate||Proposed Rate||$ Change||% Change|
|Singles & semis||$93,978||$139,830||$45,852||48.8%|
|Multiples – 2+ bedrooms||$77,679||$115,579||$37,900||48.8%|
|Multiples – 1 bed & bachelor||$38,968||$57,976||$19,008||48.8%|
|Apartments – 2+ bedrooms||$55,012||$81,852||$26,840||48.8%|
|Apartments – 1 bed & bachelor||$35,910||$53,432||$17,522||48.8%|
|Non-Residential Development (per sm)|
The draft DC by-law indicates that the increases noted above would be phased in over time, as has been done in the past, though the proposed phasing schedules have not yet been released. It also provides that the DC rates will be adjusted on account of indexing on November 1 of each year, commencing on November 1, 2023, based on the Non-Residential Building Construction Price Index for Toronto.
The draft DC by-law would maintain existing exemptions for industrial development and non-residential development above the ground floor of a building. However, the City has not ruled out potentially reconsidering these exemptions in the future.
Notably, the materials the City has released to date do not address the City’s policy on interest on DCs “frozen” from the date of site plan or rezoning application under section 26.2 of the DC Act, even though City Council has directed staff to review this policy as part of the DC by-law update.
As with the CBC by-law, the DC by-law is subject to appeal once enacted.
Proposed Parkland Dedication Official Plan Amendment and By-law
Under the Planning Act, municipalities have the right to require development proponents to dedicate parkland at the base rates of 2% of the area of land developed for commercial/industrial lands and 5% of the area of land developed for all other uses. For residential development, municipalities may instead require parkland dedication based on the alternative rates of up to 1 hectare per 300 dwelling units for land conveyances and 1 hectare per 500 units for cash-in-lieu.
Bill 197 provides that existing parkland dedication by-laws applying the alternative rates expire on September 18, 2022, unless repealed earlier. The City’s existing parkland dedication by-law provides for parkland dedication (or cash-in-lieu) at a rate of 0.4 hectares per 300 dwelling units in most geographic areas, subject to the following caps based on the size of the development site:
- 10% of the development site for sites less than 1 hectare;
- 15% of the development site for sites between 1 and 5 hectares; and
- 20% of the development site for sites greater than 5 hectares.
In practice, the caps noted above determine the amount of the required parkland or cash-in-lieu contribution for most projects requiring zoning amendments.
With the City’s existing by-law set to expire on September 18, 2022, the City is proposing to adopt new official plan policies and to enact a new parkland dedication by-law to continue to take advantage of the alternative rates permitted in the Planning Act. The proposed instruments maintain the same rate of 0.4 hectares per 300 dwelling units, but change the approach to the caps. Rather than applying caps based on the size of the development site, the instruments propose caps based on the density of the proposed development as follows:
- 15% of the development site for projects with a residential density of 2.0 floor space index (FSI) or less; and
- For projects with a residential density of more than 2.0 FSI:
- 15% of the development site; plus
- 1% for each 1.0 FSI of additional residential density, calculated proportionally, to a maximum of 25%.
For the purposes of these caps, building area used for parking and indoor amenity space is proposed to be excluded. However, hallways, stairwells, elevator shafts, and other interior building areas necessary to provide ingress, egress and access to living accommodations are proposed to be included.
In addition, for sites greater than 5 hectares in size, the proposed instruments continue to reference the existing 20% parkland dedication standard. However, rather than representing the maximum parkland dedication amount for such large sites as is the case under the City’s existing parkland dedication by-law, 20% is proposed to represent the minimum parkland dedication requirement for such sites.
The proposed parkland by-law also includes new conditions for land to be dedicated to the City for parkland purposes, including that the land to be conveyed must be set back a minimum of 5 metres from the building face of the development. Further, the proposed parkland by-law provides that the City will not accept lands that are encumbered by any municipal infrastructure, even if it is City-owned.
The proposed parkland instruments also delete and repeal certain provisions of existing secondary plans and by-laws that calculate parkland dedication requirements in a different manner than proposed.
The proposed parkland dedication by-law includes transition provisions, though they are limited in scope. Specifically, the proposed by-law provides that the capping provisions of the existing parkland by-law as outlined above (and only those provisions) continue to apply to:
- Development that is permitted by existing zoning or a plan of subdivision registered as of the date the new parkland dedication by-law comes into effect, provided that a building permit is issued within two years of the parkland by-law coming into effect; and
- Proposed development subject to a complete application for rezoning or plan of subdivision approval as of the date the new parkland dedication by-law comes into effect, provided that a building permit is issued within two years of the date the zoning amendments are enacted or the plan of subdivision is registered.
It is unclear whether the City intends to enact the parkland by-law at its Council meeting in June, or at a subsequent meeting in July or August. The new by-law may also provide that it comes into effect on a date after it is enacted, provided that it is on or before September 18, 2022.
The proposed two year window between zoning approval and building permit may provide limited comfort to applicants given current lengthy timelines for obtaining site plan approval, which is required prior to building permit. In addition, the transition provisions proposed would mean that portions of large projects with multiple phases that are built later may be subject to different parkland dedication requirements than earlier phases, even though they are both approved under the same zoning by-law.
Both the parkland dedication by-law and the associated official plan amendment are subject to appeal to the Tribunal once approved.
The proposed instruments summarized above were released for consultation purposes on April 12, 2022. The City has scheduled public information and consultation sessions for April 26 and 28, 2022, and staff have indicated they intend to present the proposed instruments to the Planning and Housing Committee in May, with final instruments going to Council for approval in June. As noted above, even if the proposed instruments are approved by Council in June, enactment of the associated by-laws could be delayed until a Council meeting in July or August.
We will continue to monitor the City’s proposed growth funding tools as the consultation and approval process unfolds. In the meantime, for more information, please contact any member of our Municipal, Planning and Property Tax Group.
1 See The 2019 Housing Supply Action Plan: Much More than a Return to the Former OMB Process, May 22, 2019; Province Unveils Proposed Approach to Community Benefits Charges, March 5, 2020; and Ontario Rethinks Proposed Community Benefits Charges and Changes to Parkland Dedication and Development Charges, July 13, 2020.