DCCs are back--and more confounding than ever!
By Andrew Bennett
Coun. Andy Stradling has been hounding staff for months to get back to council with a draft DCC (Development Cost Charge) bylaw. Staff have done just that and more, presenting five draft bylaws encompassing a range of DCC options at Monday’s Committee-of-the-Whole meeting, but on closer inspection, none were found acceptable by council.
DCCs are charged when properties are subdivided to help fund city infrastructure. They work well to raise funds for city upgrades when there is a boom in new growth. In Rossland, however, we have seen no boom. The problem we face is one of replacing ageing infrastructure — and soon — for a relatively stable population.
To help fund the city’s infrastructure needs, council have now instructed staff to go back to the drawing board to consider a more diverse tool set of cost charges than the narrow scope offered by DCCs.
Staff’s five options already included some with connection cost charges (CCCs) that are applied more broadly to all infill and subdivided lots, but as the bylaws’ focus was DCCs, the CCC approach had not been fully developed.
Coun. Kathy Wallace explained that the failure of the five options was “just a matter of staff following council direction.”
Coun. Hanne Smith said, “[CAO Victor Kumar] was constrained in answering what council told him. We told him to come back with a DCC bylaw, and that’s what he did. But there’s a lot more to it than that: there are a lot more tools available.”
Wallace forwarded a motion to explicitly ask staff’s opinion: “What’s the combination of cost charges that would most benefit the city?”
Nevertheless, council read and debated all five DCC options carefully before reaching a collective decision that, as Wallace said, “DCCs bind us in a way that doesn’t make sense.”
“Everyone in this room wants this to work for the community,” Smith said.
As council moves to look at the issue of cost charges more broadly, it is worth recalling the history of the DCC debate.
In November, 2005, Urban Systems produced an updated backgrounder on DCCs for the city, including estimates of future infrastructure upgrades — namely roads, sewer, and water — based on projections for development.
Developments were proceeding apace in those heady days, with 100 subdivision units approved in 2005 alone. The Urban Systems report looked forward to Red Mountain subdivisions surpassing the threshold of 1000 new units that they suspected would trigger a need for substantially new infrastructure development.
In May, 2009, AECOM produced another DCC report for the city based substantially on work carried out in early 2008 and updated to reflect DCC reserves at the time.
The dates are important: Economic times have changed dramatically since those years when real estate values were high and speculation on development was optimistic. The AECOM report, for example, cites “exciting developments … enticing recreational enthusiasts” that would result in growth and even “spill over.” Since then, of course, the globe has been gripped by recessions.
Several factors are critical to the task of setting DCC rates. These include projections for population growth, the list of city projects and their timeframe, and the calculation of how these new services benefit different segments of the population. Before approving a new DCC, council must also consider whether DCCs may deter future development or discourage the construction of reasonably-priced housing.
The AECOM report used very optimistic population projections, predicting strong growth in “seasonal occupants and second home ownership” based on the upward trend in building permits between 2002 and 2008. Although they recommended their projections be “tempered by medium term impacts in the US market,” there is no indication that they were planning for the economy to tank as badly as it has.
The AECOM report followed Urban System’s lead in predicting an average of 70 new subdivisions each year over 15 years. These projections may have made sense in 2009 when, looking back to 2005, there had been an average of 60 subdivisions approved each year. But only 20 new subdivisions have been approved in the two-plus years since the AECOM report, with no reason to believe an economic turnaround is in sight.
Given a more realistic projection of 15 new subdivision units per year, the city can only expect DCC revenue from some 225 units in the next 15 years. At these numbers, staff do not think substantially new infrastructure will be required to handle extra volume, besides the replacement of ageing infrastructure that is already underway.
Furthermore, both the Official Community Plan (OCP) and the Strategic Sustainability Plan (SSP) focus on conservation measures that should, over time, decrease the need for capacity increases in the city’s systems. Public Works already reports that per capita water use has been decreasing over the last several years.
In the near term, however, major upgrades require funds that, staff analysis suggests, are better raised through connection charges on all new lots rather than development charges focused on subdivisions. Even a massive hike in DCCs would hardly help the reserve fund, staff argue, but it would certainly dissuade future development and likely hurt Rossland’s long term hopes of increasing its population and tax base.
