Should Developers Get Fees Cut? Digital Dog

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Today Alf Chaiton of Tweedsmuir Consultants discusses with The Bulldog’s Ken Gray whether developers should receive a 10-per-cent cut in their building permit fees.

The podscast is below:


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4 thoughts on “Should Developers Get Fees Cut? Digital Dog

  1. Are we talking apples and oranges? Even Alf Chaiton admitted that he did not know the details of this building-permit reserve surplus.

    Matthew Pearson (Ottawa Citizen: “City considers slashing building-permit fees”) reported that the city has three separate building funds, from the permit fees, that have a huge surplus. This was likewise covered by CBC Ottawa News, back in November 2015, reporting that this is no miscellaneous reserve fund: “The fund is intended to help cover the city’s costs of doing building inspections and other Ontario Building Code enforcement in years when revenues from building and demolition permits are down …. The money cannot be moved to other branches of the city to cover shortfalls because of provincial legislation.”

    Therefore, the recommendation is that the city reduce the permit fee in order to bring the surplus reserve down to a more balanced level. As Pearson reported: “The city collected $21.6 million in fees last year, but spent just over $23 million. A reduction in the number of building permit applications resulted in about $1.5 million less in revenue.” So, with the present building slow-down, and a reduction in permit fees, this building-permit reserve fund should return to a more balanced level within the next few years.

    Again, this reduction in the building permit fee is a separate issue (apples and oranges) from the broader development charges, which should probably be increased to reflect the greater demands for infrastructure money by the city. Indeed, the provincial government seems to recognize this reality, as reported this Thursday (Ottawa Sun: “Province proposes changes to developer fees, OMB mandate”).

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  2. Developers get the profits from development and the city is left with providing the infrastructure to pay for the external costs of the development. This leads to overdevelopment since the developers are only paying for the private costs of their actions, not the external or social costs caused by their actions. This of course can never be made perfect but the situation can only be made worse by lowering the cost to developers.

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  3. Unless there’s a shortage of housing and we want to increase development to meet that need, I can’t see the rationale. And handing out a 10% discount across the board just goes to show not a lot of thought was put into it.

    My 2 cents

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  4. The Ontario Government requires the city to have a permit fee reserve fund in order to fund the city’s costs of doing building inspections and other Ontario Building Code enforcement in years when revenues from building and demolition permits are down. n.b. This reserve fund money CANNOT be moved to other branches of the city to cover shortfalls because of provincial legislation.

    Therefore, the options regarding this permit reserve fund surplus are:

    1) do nothing and continue to keep this large surplus on the books.
    2) Hire more building inspectors, i.e. the larger payroll will help reduce this surplus.
    3) Reduce the cost of the permit (essentially an overpayment at present) and allow the surplus to diminish — the permit cost can always be adjusted up again if the housing market becomes red hot.
    4) Petition the Ontario Government to allow us to transfer this surplus money into General Revenue.

    For example, if the development charges for a particular new house are $10,000, and the permit fee is $500, then the city is going to reduce the permit fee by $50. This is in order to get the permit reserve fund back into balance. If the city feels that they need more infrastructure money, then they can still raise the development charges by $50 or $100 or whatever — albeit, the next review for these development charges does not happen until 2019.

    In short, do not confuse the permit reserve fund with the broader development charges.

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