Growth fee now impact fee

During the height of the property tax freeze regime in Winnipeg, former Mayor Bill Norrie (mayor 1979-92, d. 2012) prophetically told me that such freezes may be popular, but there will certainly be a penalty to be paid later in the form of city budgets being unable to cope with rising service costs and crumbling infrastructure. Fourteen years of property tax freezes ended in 2012, under then Mayor Sam Katz, who said that it was unrealistic to continue the freezes when service, salaries and pension costs were rising beyond city revenues.

There’s no question that Winnipeg mayors have in recent years been grappling with a lack of money to fund rising service costs and deteriorating infrastructure. In the past, former Mayor Glen Murray suggested that the solution was receiving one percentage point of the provincial sales taxes. Of course, such a measure would never gain the acceptance of the provincial government, regardless of political stripe.

Mayor Brian Bowman’s solution was to raise property taxes — more than his election promised of pegging the tax hike to annual inflation — and disguise other taxes under such names as  frontage fees. But the mayor also recognizes that continued property tax increases are extremely unpopular with ratepayers, and there comes a point when steady property tax increases in whatever guise become a political liability.

As such, the most recent musing from the mayor has been the implementation of a growth fee, or what he chooses to label an “impact” fee under the alleged premise that “growth is not paying for growth.” Whatever it’s called, it’s simply a new tax on new developments, whether residential or commercial.

To prepare the public for the implementation of the new tax, two reports were quickly released by the city. The first outlined projections for population growth and housing needs, while the second included the amount of fee to be levied. For the average new home, the fee was at first said to be $30,000, but has since been lowered to around $18,000, according to recent discussions at city hall. There was even a date desired by the mayor for implementation — January 1 of  this year.

Regardless of the fee discussed, it should have been foreseen by the city that there would be an immediate push-back by those involved in the construction industry and housing market. Developers said the concept should be given more consideration before it becomes a reality.

“Developing a regime of charges to facilitate growth has to be done carefully,” Qualico’s vice-president, Eric Vogan, told the REN. “You have to walk before you run. If the charges are rushed in and done badly, things could go from bad to worse in a hurry.”

Mike Moore, president of the Manitoba Home Builders’ Association, said that, for some reason, there’s a misconception that developers don’t pay their fair share in development costs. “In actuality, developers pay for 100 per cent of development costs within a subdivision — roads, land for parks/schools, hydro, water and sewers; the city doesn’t pay any money for that. Developers also share costs for arterial roads, such as when Qualico paid to widen the road and create additional turning lanes into Sage Creek. The bottom line is that tax dollars do not subsidize new developments.”

He added that with so much at stake, it’s imperative that the city and developers get together to discuss the growth fee concept in a calm, rational manner. “Both sides need to sit down at the table and work together to calculate things so everyone can work together to make Winnipeg a better city,” he said. “That’s the question we have to ask ourselves: how can we work together to make things work for both sides.”

The very fact that housing industry leaders, as well as the Winnipeg Chamber of Commerce, Manitoba Chambers of Commerce and the Business Council of Manitoba, wanted the mayor to stop and take a deep breathe has resulted in the realization that more work had to be done before going ahead with the mayor’s plan.

At the most recent Executive Policy Committee (EPC), when the fees were to be voted upon, the proposal was roundly criticized by the development community and others with a stake in the development of the city.

The result was that the city’s growth fee was put on hold, and the mayor announced that Councillor John Orlikow will undertake more dialogue with industry stakeholders.

“From a public policy perspective,” the mayor told the media after the meeting, “there was very good information that we are hearing today. I may not agree with it, some of it may not have been factually correct, but there was good content that was provided.”

How long the discussion will continue was not disclosed by the mayor, but he didn’t rule out implementing the fee on January 1. But it has always been the assertion of industry stakeholders that they should have been involved in discussion about such a fee from the vary beginning.

Vogan told the REN that a spirit of co-operation has been in place in Calgary for the past 45 years. “They don’t have a tax there. Calgary city council instituted new fees this year (covering water-and-waste treatment plants, libraries, police stations and transit), but only after they consulted with developers.”

Consequently, it’s essential that the city work hand-in-hand with developers to establish a fair, balanced fee system, Moore said. “There are a number of concerns. First, there are 15,000 jobs within the residential construction industry that are at stake. That industry accounts for 5.9 per cent of jobs in Manitoba, so jobs could be lost if the industry experiences a slowdown.

“Second, an onerous growth fee could negatively impact the city’s growth and development. People living outside the city will come in and use services, but won’t contribute taxes. That would create a bigger deficit in the tax base.”

WinnipegREALTORS® president Stewart Elson said a hastily-imposed growth fee could cause a number of problems. “Not only would new home starts drop significantly, but a high growth fee could put buying a new home out of the reach of many people, especially first-time buyers. At the same time, prices of resale homes would increase, also making things tougher, particularly for first-time buyers.”

Imposing growth fees would also prompt more people to build outside the city, added Elston. “It’s already happening. If the growth fees go through, it will occur on a much greater scale. Growth fees would create an atmosphere that would push new development outside the city, as people would be forced to build outside city limits in order to afford a new home.”

According to housing industry insiders, Bowman’s self-styled impact fee will indeed have an impact, but not the one projected by the mayor. In the end, the consultations that should have been made when the proposal was only a germ of an idea are finally on the table. Still, there is little assurance that the mayor will not implement the fee even as these discussions are occurring.