On May 1, 2018 Toronto City Council's new Development Charges bylaw (the City bylaw) came into force. Development charges (DCs) are collected from property developers when an above grade building permit is issued. DC revenues help governments offset the costs of new infrastructure required to provide services to new developments. The municipal power to levy DCs stems from the Development Charges, Act, 1997 (the DC Act). Today most Ontario municipalities have a DC regime in place.
Traditionally DCs were payable at the issuance of the first above-grade building permit, but as of this new DC bylaw a major change is that they are payable as of the issuance of the first building permit. This makes the bylaw consistent with s. 26(1.1) of the DC Act which was revised to clarify that in 2015.
Renewal of the City bylaw was the result of a comprehensive review process. In 2017, the City began collecting data for proposed DC calculations. During the winter of 2017-18, the City conducted a Background Study and engaged in consultation with stakeholders and the general public. The proposed bylaw then went before the Executive Committee before Council debated and approved the measure in April, 2018.
The new City bylaw increases DCs over a two year period. For non-residential developments, 50% of the increase will come into effect November 1, 2018 and 80% of the increase will come into effect November 1, 2019. The full increase will come into effect November 1, 2020. A phased approach is particularly beneficial for projects which require significant upfront capital budgeting because it allows developers to adjust to these increases more gradually.
There are several important exemptions to the City bylaw. DCs are not imposed for the intensification of small residential housing by adding one or two units, the enlargement of an existing dwelling unit, or the creation of an additional dwelling unit in an existing single detached dwelling. There are also exemptions for hospitals, worship facilities, temporary sales offices and land used for colleges or universities.
Businesses should note that despite initially being considered for removal, the exemptions for industrial uses and commercial uses were maintained in the updated City bylaw. However, not all commercial development is exempt. Non-residential DCs may still apply to commercial developments.
The City bylaw also does not create area-specific DCs. This is consistent with the precedent of having DCs apply across the entire City of Toronto. Area-specific DCs are typically used for infrastructure which is confined to a specific area. City-wide charges are often easier to calculate than geographically-based charges, which is why uniform DCs are widely used throughout Ontario.
Stay tuned for future blog posts on this topic, including such things as timing of building permits and DC increases, disputing a DC calculation, and assignment of DCs under agreements of purchase and sale.
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