New fee could raise lot prices by as much as $30k: home builders

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Anger is building within the city’s development community after revelations a proposed new fee for residential development might also be applied to new commercial and industrial development.

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Hey there, time traveller!
This article was published 18/08/2016 (2305 days ago), so information in it may no longer be current.

Anger is building within the city’s development community after revelations a proposed new fee for residential development might also be applied to new commercial and industrial development.

Residential developers who attended a Thursday briefing with the city’s consultant said it appears the city is building a case for a fee that would add $20,000 to $30,000 to the cost of a new residential lot.

The information from the briefing shows non-residential developers might face an even steeper bill: a $100,000 fee for a new 5,000-square-foot commercial/retail space and a $410,000 charge for a new 10,000-square-foot office building.

Mike Moore, president of the Manitoba Home Builders Association, said the data compiled by the consultant uses questionable growth costs that will be put on the shoulders of residential, commercial and industrial developers.

Upping the price

Winnipeg’s development industry could face huge additional costs if a consultant’s report is adopted by council.

A Powerpoint presentation by Hemson Consulting to the residential development industry on Thursday revealed potential new fees for residential, commercial, industrial, and institutional developments:

Residential

Single family and semi detached: $30,272 per lot

Apartment: $15,982 per unit

Town houses: $24,339 per unit

Non-Residential

Commercial/retail: $221.81 per square metre, or $20,606 for every 1,000 square feet

Industrial: $88.72 per square metre, or $8,242 for every 1,000 square feet

Office space: $443.65 per square metre, or $41,215 for every 1,000 square feet

Institutional: $136.51 per square metre, or $12,681 for every 1,000 square feet

The consultant breaks down the cost of city services — parks, community services, police, fire and paramedic services, planning, roads, transit, water, sewage and storm water, solid waste — and applies those costs to new developments.

City economist Tyler Markowsky said Hemson had yet to calculate the growth costs for fire and paramedic services, but those figures will be included in the final report. Markowsky said zero costs were assigned for parks and community services for non-residential development because the initial assumption was that occupiers of those developments do not use those civic facilities.

However, Markowsky said that assumption is being reviewed and the figures could change.

“Over the next couple of weeks, we’ll be going through all those categories and lists of projects and making sure everything is accurate as possible,” Markowsky said.

“There’s a considerable disagreement between the development and building community and the (consultant’s) report,” Moore said following the three-hour meeting between representatives of the home building industry and Hemson Consulting.

“The reaction of the room — disappointed,” Moore said. “Disappointed in the numbers, disappointed in the process. There was a fair amount of frustration in the room.”

Two dozen home-builders and developers gathered at the St. James Civic Centre auditorium to review the data compiled by Hemson and then spent the bulk of the morning questioning the consultant’s methods and conclusions.

Hemson Consulting was hired to prepare a report examining the cost of projected city services over a 25-year time frame, broken down into several categories such as policing, parks and open spaces, community services, fire and paramedic services, planning, roads, garbage and recycling collection, water and sewer services and transit; how much of those costs can be attributed to development growth; and how other municipalities have coped with growth costs.

Hemson was to have submitted a draft report to city hall Wednesday, which is also believed to be what he presented to the home builders.

A report is due to city hall by Aug. 31.

Mayor Brian Bowman favours a new fee on developments. He’s said taxpayers cannot afford to cover the costs new developments place on city services.

The residential industry disputes Bowman’s argument, stating developers already pay for all city services needed for individual projects and property taxes levied on new homes contribute millions of dollars to the city’s property-tax base.

They fear a new fee will scare off buyers and lead to a decline in purchases and construction.

It’s believed Bowman will present a case for new fees to council before the end of the year, to be included in the 2017 budget and go into force next year.

It was assumed growth fees would apply only to new residential construction, but the home builders said it appears Hemson is building a case where new fees might be charged to commercial and industrial projects, too.

Only residential developers attended Thursday’s briefing. The residential industry was critical that Hemson was instructed to hold only two briefings with them, and Moore said it’s unfathomable city hall is contemplating such huge new fees for non-residential developers and they weren’t consulted.

“It’s unbelievable that those people would not be considered stakeholders and be invited to the sessions.”

City of Winnipeg economist Tyler Markowsky said Hemson Consulting based its findings, in part, on data supplied by city hall, adding up a comprehensive list of identified capital projects over a 25-year period and then determining, using methods employed elsewhere, how much of those costs can be directly tied to growth.

JOE BRYKSA / WINNIPEG FREE PRESS Mike Moore, president of the Manitoba Home Builders Association comments after meeting where development industry reps were briefed at the St. James Civic Centre Auditorium.

Hemson’s presentation was posted on the city’s website Thursday.

Moore said Hemson’s presentation to the home builders did not specifically include costs for growth fees, adding the potential cost is clear by adding up the figures in Hemson’s presentation.

Moore said developers were troubled with many of Hemson’s conclusions, adding he told them new suburbs are responsible for 30 per cent of the growing cost of transit services.

“That seems absurdly high to us,” Moore said. “We’re the last stop in a bus route, and that’s 30 per cent of the entire transit system?”

Moore said Hemson made similar findings for other city services.

“We’re going to be checking the veracity of those numbers,” Moore said, adding his group took legal counsel and their own consultant to Thursday’s meeting. “We’re going to be verifying Hemson’s calculations and what information was given to Hemson by the city and whether that is correct.”

Moore said the home builders will prepare their own report in response to Hemson’s findings and release it publicly, adding he hopes the industry will be given an opportunity to present it to city councillors.

Markowsky confirmed the city’s finance department will present a range of options for growth fees on a variety of projects, including residential, commercial and industrial development, and what the fees would be on individual projects to cover the costs attributed by that growth.

“The analysis we are undertaking right now is following the practices used in other jurisdictions,” Markowsky said. “We want to create as complete a basket of options possible and bring that forward and have that considered,” by council.

Markowsky said councillors will decide whether to implement growth fees, how much they would be and whether they should be charged to commercial, industrial or residential projects or on a combination of all three, or exempt any of those sectors.

“It could be any of those options,” he said.

City officials heard developers’ concerns and city staff will confirm the accuracy of the firm’s work, he said.

MOTIVES QUESTIONED

Non-residential developers are questioning city hall motives after learning Thursday that their projects could face steep fees as the city grapples with rising infrastructure costs.

Spokesmen for several groups representing commercial, industrial and office space builders said they’ve been left in the dark over the city’s plans.

“We were never consulted, no one contacted us,” said Colin Fast, spokesman for the Winnipeg Construction Association. “This caught us by surprise.”

A consultant’s briefing conducted Thursday revealed that the city could impose hefty fees on new residential, commercial, industrial, institutional and office building construction.

It was only the second meeting between developers and Hemson Consulting. The first meeting occurred in July.

Peter Squire, spokesman for Winnipeg Realtors and a representative who attended Thursday’s meeting, said there was surprise in the room when it became clear that other industry groups will be affected.

“This process has been very much expedited to meet an arbitrary deadline,” Squire said. “City hall needs to step back and consult meaningful with all the stakeholders.”

Markowsky, the City of Winnipeg economist who is overseeing the growth charge project, said repeated attempts were made by city hall to include all members of the development community and he couldn’t explain why some chose not to attend.

“We’ve done our best to consult with the groups,” Markowsky said. “We reached out to a lot of groups in the first session. Many, many didn’t even show up and only just replied with an article.

“This session, we invited the same groups but those who chose to attend, chose to attend.”

Markowksy said he couldn’t be certain who was on the invitation list.

Fast said his group hadn’t been invited to either meeting.

Sandy Shindleman, president of Shindico Realty Inc., which is one of the city’s leading non-residential developers, said he had not been invited to the meetings and wasn’t even aware that the city is considering imposing a fee on non-residential projects.

Shindleman predicted developers will go elsewhere if Winnipeg opts to impose punitive growth-development fees on new non-residential developments.

“Industry simply goes where it’s wanted,” Shindleman said. “During the years of the (former Winnipeg mayor Glen) Murray administration, firms like ours built a million (square) feet of retail outside the city. And that million (square) feet did a lot for those communities, and it was appreciated. But it certainly didn’t help Winnipeg.”

Fast said the construction association will need to study the Hemson Consulting briefing notes before it can prepare a response to the proposed new fees.

“We can appreciate the city is looking at new sources of revenue but our response depends on what the rate is and to what purpose the money will be put,” Fast said. “We need to see the numbers.”

With files from Murray McNeill

aldo.santin@freepress.mb.ca

PHIL HOSSACK / WINNIPEG FREE PRESS New housing construction in Ridgewood west, bordering the Harte Trail and Perimeter highway.
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