It was to be expected. The Manitoba Home Builders’ Association (MHBA) and the Urban Development Institute (UDI) are asking their lawyers to clarify with the Manitoba Courts whether the city of Winnipeg has the legal authority to impose a regulatory fee on new developments. The legal challenge is expected to reach the Court of Queen’s Bench within the first two weeks of January.
In a press release, the two industry groups said that the 10-6 vote by city council to impose the Impact Fee Bylaw forced their hand. In essence, they had no choice, but to protect the development industry from the imposition of what they regard simply as a badly-thought out tax grab disguised as a fee. The fee on a new home is about $5,100 per 1,000 square foot.
“The fact is,” said Eric Vogan, the president of the UDI’s Manitoba Division, “we remain a city without a plan. This fee is not based on any measurable calculation of impacts from new residential development and is a tax. One that we believe the city does not have the authority to impose.”
But by calling it a fee rather than a tax, the city believes it has the authority to impose an impact fee. If it was referred to as a new tax, then the provincial government would have to approve a change to the City of Winnipeg Charter, and Premier Brian Pallister is on record as opposing any new city taxes. Earlier, Pallister said it would be better if got its spending under control and that all governments face financial challenges.
“To simply acquiesce to the belief that we should raise taxes and fees on an almost annual basis — and somehow that’s going to be the solution to our development problems — is to me, shortsighted,” Pallister said (GlobalNews, September 20,2016).
Whether it’s called a tax or a fee, the courts will determine if the Manitoba government has the final authority make the necessary change to the City of Winnipeg Charter, a piece of provincial legislation. The common terminology — and to the point — is that municipalities are creations of the provinces.
Still, Pallister did say to the media that it may be possible for the city to charge the fee, although he didn’t elaborate how this could be done without provincial approval.
Mike Moore, the president of the MHBA, said that since the bylaw imposes the fee starting on May 1, 2017 — six months away — that time would be better spent putting together a development plan for the city.
“We would much prefer working with the city administration through a plan-based process to development charges, one that appropriately attributes costs to new developments and provides accountability for where the money will be spent.
“Instead of putting taxpayers at risk, the city should spend this time to develop plans required to support a responsible and legal cost-sharing structure for new developments,” added Vogan. “We are still willing to sit down and work through a plan with the city within a reasonable time frame, for the benefit of Winnipeg as a whole.”
In an article for the REN, Moore said: “We need to priorize to ensure that all projects in our planning exercise fit within reasonable timelines and are affordable for all citizens ... We need to properly attribute to both new development and existing residents the costs related to new infrastructure. No one group is responsible for picking up the tab. All of us have the responsibility for paying our fair share.”
The driving force behind the fee has always been Winnipeg Mayor Brian Bowman, who caught developers by surprise when he claimed that, “growth isn’t paying for growth,” and that “growth has to pay for growth.”
To rationalize his allegation, the city commissioned a couple of reports.
The first report indicated the city would reach a population of 1-million people by 2034-35 and surpass 1 million by 2040. From now to 2040, “the number of households is expected to increase by around 32 per cent, or approximately 100,000 units ...”
With this increase, the forecast indicated that changes in numbers and types of homes, especially new homes and new neighbourhoods, will increase demand on municipal services and infrastructure, putting pressure on future city budgets.
The bylaw was passed under the belief that the cost of constructing infrastructure, including regional roads, transit, recreation and leisure centres, had to be offset by an additional fee for new subdivisions.
Moore said it’s a misconception that developers don’t pay their fair share in development costs. “In actuality, developers pay for 11 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.”
Actually, other studies made the same point as Moore. An ND Lea study in 2004 stated that Waverley West would have a net value to the city over an 80-year period of $213 million. The city commissioned its own study showed a $71 million net value, not the same number, but it indicated that Waverley West would be a net contributor to the city’s coffers. Another report by MMM Group in 2013 claimed the numbers were even higher at $250 million for the 80-year period. In 2014, another report by Deloitte, after a review of all three studies, stated that new developments produced excess revenues for the city, which allows the city to invest in other infrastructure projects. The city has announced that revenue from the new fee — expected to be $1 million from May to December 2017 — will be directed to a reserve account and not the city’s general revenue.
Of course, the fear is that development will become stagnant in the wake of the new fee and take away jobs related to the residential construction industry.
Moore said an onerous growth fee has the potential to negatively impact the city’s growth and development and drive people to build outside the city’s borders. “That would create a bigger deficit in the (city’s) tax base,” he added.
WinnipegREALTORS® president Stewart Elston told the REN that, not only will new home starts drop significantly, but the fee could also put buying a new home out of the reach of many people, especially first-time home buyers.
“At the same time, prices of resale (existing) homes would increase, also making things tougher, especially for first-time buyers,” he added.
Then there’s the fact that the bylaw calls for the fee to eventually take in commercial developments and infill housing.
Stephen Sherlock, the commercial chair of WinnipegREALTORS®, said the fee has the potential to derail the city’s commercial industry sector and make the city uncompetitive in relation to other major centres.
With all the sound opposition to the impact fee, it’s no wonder a court challenge is being made.