[Bunk]

OK, let me try and explain this issue around development levies as best I can.

These levies are charged through an acreage assessment. That is, when a developer goes to subdivide land, it triggers the payment to the City (per acre) of a set of levies and charges (as well as other obligations) to pay for "off-site" infrastructure including:

• Transportation (Road upgrades, buses, etc) - LRT infrastructure is excluded as a city-wide piece of infrastructure
• Storm Sewer
• Water and Sanitary Sewer
• Community and Recreation (Emergency Response Facilities, Libraries, Police Stations, Recreation Centres
• Inspection fees
• Signage fees

The levies are negotiated through a "Standard Development Agreement" every five years and executed through an "off-site levy by-law" The City has the ability to impose the levy under the Municipal Government Act, but engages in a negotiation process with the suburban developer group - Urban Development Institute (UDI).

"On-site" infrastructure - things like internal roads to a community, sidewalks, streetlights, pipes and parks are paid for by the developer.

Costs for each category of infrastructure are based on real pieces of infrastructure in Calgary with assumptions around inflation. The Transportation levy for example is calculated by adding up the estimated cost of all transportation infrastructure within greenfield areas yet to be developed (except for LRT) required to support suburban growth. That number is divided by the amount of developable land (net of environmentally sensitive areas, slopes, etc) to come up with a levy per acre. It also includes 17% of the cost of "downstream" infrastructure - that is the cost of upgrading Transportation Infrastructure within the existing built up area as new development adds burden to that existing infrastructure as well.

The amount of infrastructure required is based on assumptions such as development density. In the case of the 2011 agreement, it was based on a city-wide density of about 18 units per hectare (even though actual greenfield development is averaging about 20-25 units per hectare). There are also assumptions agreed to such as how many libraries are needed per so many thousands or residents.

The 2006 agreement, did not include a levy for water and sanitary sewer infrastructure, which has led to significant municipal debt. It was reintroduced (albeit at only 50% cost recovery through the levy agreement) in the 2011 agreement.

The total levy increased from $137,380 per acre from the 2006 agreement to $281,925 essentially doubling the average levy cost per home to $15,662 (from about $7500)

The premise is that levies should only cover the cost of the initial outlay of capital, not lifecycle or ongoing operation costs.


If you break down the components of the levy (acreage assessment), you can see there is a discount to full cost recovery of off-site infrastructure.

1. Transportation $119,605 ($6,645 per home) 100% cost recovery
2. Storm Sewer $16,080 ($893 per home) 100% cost recovery
3. Waste Water $44,346 ($2,464 per home) 50% cost recovery
4. Water $24,469 ($1,359 per home) 50% cost recovery
5. Community and Recreation $74,438 ($4,135 per home) 85% cost recovery (due to notion that developer shouldn't pay 15% additional cost to achieve LEED Gold certification-level building)
6. Inspection fee $2,326 ($129 per home) 100% cost recovery
7. Subdivision signage fee $650 ($36 per home) 100% cost recovery

Total is $281,925 or $15,662 per home (again, this is not a direct charge on each home, just an average per door based on assumed densities that the developer pays at subdivision - some of which will get absorbed by that developer, and much of it passed through to consumers).

If you were to use a principle of 100% cost recovery of all initial off-site capital infrastructure (except LRT), you would eliminate the discount on the Waste Water, Water and Community and Recreation items.

Doing this would result in an increase of the fee of $4,552 per home. Full cost recovery would be $20,214 (with the assumptions agreed to in the negotiation).

The previous agreement was about 37% cost recovery, the current agreement is about 75% cost recovery. So one could say there is a subsidy of about $4500 per home or about 25% of the cost to support that growth with necessary infrastructure, which the rest of the tax base must make up for. At about 7000 homes in greenfield areas built last year, that equals over $30 million per year subsidizing suburban growth - or equivalent of what a 3% residential property tax increase gets the City in revenue.

The problem of course is that this distorts the market - it makes homes artificially less expensive on the periphery. Increases to the levy both get absorbed by homeowners through higher prices as well as a reduction in margins, particularly for land developers selling land to home builders.

While new homes in existing areas do theoretically add burden to infrastructure, most necessary infrastructure is already in place (initial capital outlay paid for when initial subdivision/development happened). And taxes and grants pay for lifecycle and various upgrades in all areas of the city.

Also, redevelopment such as infill usually replaces population in areas that are well below their peak populations (so basic infrastructure is in fact underutilized in these areas, and redevelopment helps make up this gap). Nevertheless, there is ongoing work figuring out what a fair redevelopment levy would/should look like to cover any potential increases in the burden it might have on infrastructure. Specific areas like the Downtown, Beltline and TOD areas have linear frontage based levies and density bonusing, but other areas, like semi-detached infill, do not.

The current agreement went a long way to closing that gap in cost recovery, but the Mayor wants to push to close it completely.

I hope that helps the clarify the conversation.