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Slumping industry can't handle cost hike: developers

More and more houses are being built outside Greater Sudbury to avoid the city’s development charges and other fees.
Ron Arnold, president of Dalron, is amongst the Sudbury builders that say rising development charges will harm the industry, resulting in less tax revenue for the city. Municipal council is expected to make a decision about fee increases in June.

More and more houses are being built outside Greater Sudbury to avoid the city’s development charges and other fees.

For example, hundreds of people commute each day from West Nipissing, where building homes is much cheaper, even factoring in added transportation costs.

“West Nipissing has issued 10 new housing permits this year, and have averaged 50 to 60 homes over the last several years,” said Kristi Arnold of Dalron.

By comparison, only nine new housing permits have been issued in Sudbury in 2014, she said.

“That's down 59 per cent from last year,” she said. “And (2013) wasn't a good year.”

A public meeting in May focused on a plan to increase development charges by 16 per cent to $17,163 per single family home. Rates for apartments and other multi-unit buildings would go up by nine per cent to $10,098. Development charges are fees builders must pay to cover the added cost of infrastructure to accommodate new commercial, residential and industrial construction.

The charges help fund projects like the $60-million biosolids plant, the $5.7-million South End Library and the proposed $125-million Maley Drive extension. The charges soared in 2009, when the charge for building a single-family home increased from around $3,000 to more than $14,000, although the increased was phased in.

Without revenue from development charges, city staff estimates that property taxes would have to increase by around $4 million, or 2 per cent.

But presenters argued that the hike in fees is harming their industry and the city is getting less in tax revenue as a result.

“(There were) 208 single-family dwelling permits purchased in 2013,” said Philip Monkhouse, president of the Sudbury & District Homebuilders Association. “That's the lowest level in 12 years. And this year looks even worse, as few permits have been purchased so far.”

He said costs have risen to the point that making a return on investment is getting increasingly difficult – and that means less construction in Sudbury.

“This is a big step in the wrong direction,” he said. “At a time when governments are subsidizing job creation, this tax is holding development back.”

Terry Del Bosco, of Tulloch Engineering, said city council may be unaware of all the “water cooler talk” in the industry about building outside of town because Sudbury is too expensive.

“A lot of my clients are moving out of the city – Sturgeon Falls, North Bay, or even Markstay,” Del Bosco said. “They find it cheaper.”

Ken Kalviainen from Noront Design and Drafting said he recently worked on a house being built just outside the city limits. When he went to buy a building permit in Warren, he was told he didn't need one.

“The guy said you don't need a building permit here. You need an application to build – $75,” he said. “Where's it going to stop? You have a choice – you can have new construction and create jobs and a positive tax base. Or a one-time fee.”

John Zulich, of Zulich Enterprises, cited an example of a 17-lot development in Minnow Lake his company is working on. If they were to build 17 single-family homes, the city would get about $150,000 in new property tax revenue, in addition to the one-time $317,000 in development charges under the current system.

But if the proposed increase goes ahead, it would make more sense for them to build apartments, for which development charges are cheaper. So the city would get less in both development charges and property taxes.

“We'd like to see a deferral on this for a couple years,” Zulich said, and more consultation with developers so they can plan ahead on how they can absorb fee hikes.

And Ron Arnold, president of Dalron, said he's had to lay off some of his staff, others have had to take pay cuts, and partners in the firm have had to forgo salary entirely as they try to cope with the downturn in the industry.

“I don't think you people really realize how bad things are right now in the city of Sudbury,” Arnold said. “When things get bad, we share the pain. At times, the partners don't take a paycheque.

“I would challenge you to share the pain with us now.”

A final decision on development charge rates for the next five years will be made by city council in June.

Darren MacDonald

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