Construction and development firms in Sault Ste. Marie are lauding city council’s decision to stay a proposal to introduce development fees on new builds.
Council started the discussion around development fees as far back as 2012, with the commissioning of a study by Toronto firm Watson & Associates Economists Ltd. In late September, council was asked to provide more funding to update the study, but with little support, the ask was quickly defeated.
The decision was welcome news to the Sault Ste. Marie Construction Association, whose members are already feeling the pinch of a downturn in business, said the association’s manager, Adam Pinder.
“I think, given everything that’s going on, it’s a positive that the councillors decided not to continue on the process and to let development go on in Sault Ste. Marie uninhibited from further fees and charges that’ll be put on the contractors,” he said. “However, I think we all wish we were in an economic climate where development charges made sense for us, but that’s just not the reality of the economy in Sault Ste. Marie.”
Development fees are additional charges added onto new commercial, industrial and residential builds. Although their use is reserved for a limited number of purposes, they are considered a way for a city to generate revenue for infrastructure such as sewer and water hookup or road-building.
The Sault has never had development fees applied before; of the five major cities in Northern Ontario, only Sudbury and North Bay currently have development fees in place.
\Pinder said the Sault would need to see a significant change in demographics to justify introducing development fees. Looking at building permits, construction activity in general is down this year compared to the same time last year, he noted, and his members are noticing the lag.
“I would like to think that our members are continuing to hold their own, but they’re certainly not as busy as they’d like to be, and there could definitely be a lot more work for a lot of them,” Pinder said.
Equally pleased by the decision is the Sault’s Chamber of Commerce, which had lobbied against the implementation of development fees, citing job losses and a severe impact to the economy.
Jason Naccarato, the first vice-president of the chamber’s board of directors, said development fees make sense for rapidly growing communities, which have to build new fire halls or roads to keep up with the pace of growth; he cited Milton, Ont., or Fort MacMurray, Alb., during its boom as examples.
But without that rapid growth, development fees hit developers who are already struggling.
“(The city is) looking at it as just a revenue source, but we’re saying it’s going to decrease investment in construction,” Naccarato said.
“We know — and it’s very well documented — that for every $1 million in construction, that’s 11 year-round jobs, so if you implement development charges, what projects do not go ahead and what’s their value? Because if their value is $3 million, that’s 33 jobs our community just lost.”
Conversely, if the city lands $33 million of investment, that creates 33 jobs, he added. But development fees would be a serious deterrent to anyone looking to invest in the Sault, which may be in competition with other communities for that business.
Although Naccarato doesn’t believe the file on development fees will ever be fully closed — the city can always revisit the issue at any time — the chamber will now shift its focus to lobbying for more competitive commercial tax rates, which Naccarato said are too high.
But he expressed appreciation for an ongoing open dialogue with city council and hope that the relationship would continue.
Without development fees in place, the city has few other sources of revenue generation, noted Don McConnell, the city’s director of engineering services.
Development fees are highly regulated and their use is strictly limited, but they do have their benefits, he noted.
“The advantage that they have is that, because you can use them for basically infrastructure improvements, that does free up money for other initiatives moving forward, anything that’s being paid for out of the general levy,” he said.
The only other way to generate revenue for those infrastructure improvements is through taxes, something most residents frown upon.
“So, it’s one or the other,” McConnell said. “People are going to say, ‘Well, just don’t raise taxes at all,’ but in the long run, that’s not sustainable.
“The question becomes, are you asking people to pay as a result of new development to cover those costs, or are you asking the general taxpayers to pay to cover those costs? That’s the basic theory behind development charges.”
