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The Province of Ontario has now introduced regulations which flesh out how the Community Benefits Charges regime, initially announced in 2019 by Bill 108, the More Homes, More Choice Act (“Bill 108”) and revised by Bill 197, the COVID-19 Economic Recovery Act (“Bill 197”), will function.
On September 18, 2020, O. Reg 509/20 Community Benefits Charges and Parkland (the “Regulation”) under Ontario’s Planning Act was filed by the Minister of Municipal Affairs and Housing and came into force. On the same day, the remaining amendments to the Planning Act and the Development Charges Act (“DCA”) made by Bill 108 and Bill 197 came into force. The Regulation is accompanied by additional technical changes to existing regulations to finalize the new structure for development charges, community benefits and parkland.
The new regulation implements the changes announced this year, reversing the move towards integrating parkland dedication/cash in lieu, development charges and Section 37 benefits obtained on zoning into Community Benefit Charges (“CBCs”). While CBCs will effectively replace Section 37 benefits, development charges and parkland dedication or cash in lieu of parkland dedication will continue to remain separate requirements.
Development charges will remain under the DCA. A municipality may not levy both a development charge and a CBC for the same service. Development charges that may be levied are definitively set out in a finite list in section 2(4) of the DCA while CBCs are more flexibly referred to as “capital costs of facilities, services and matters required because of development or redevelopment”. While that clearly creates potential for overlap, once a municipality has included a matter in its development charges by-law a CBC cannot collect for the same matter.
The new regulations attempt to draw clearer lines between what falls within the development charges regime, the parkland regime and the CBC regime. For example, O. Reg 513/2020 clarifies that the term “acquisition of land for parks”, for which development charges may not be levied, includes the acquisition of woodlots and environmentally sensitive land, and that enclosed structures and land necessary for those structures to be used for public recreation will be considered to be “parks and recreation services” which can be the subject of development charges.
Parkland dedication (and cash-in-lieu) requirements will continue to remain under Section 42 of the Planning Act. However, the Planning Act now includes requirements for notice of and a new appeal right (within 40 days) to the Local Planning Appeal Tribunal (the “Tribunal”) for any by-law adopting the alternative parkland dedication standard of 1 hectare per 300 dwelling units. The Tribunal will have fairly broad rights to amend the alternative standard by-law, but not to increase the requirement. The criteria used by the Tribunal to assess these by-laws will undoubtedly develop over time. Nonetheless, this is significant change which will require municipalities to justify the adoption of their alternative standards. This really represents a sort of compromise between the original proposal to eliminate the alternate parkland standard altogether (and integrate it into the CBC) and the existing regime.
However, there appears to be no transition provisions for this new right and it is therefore still unclear what real impact this will have in those municipalities that have already adopted the alternative parkland dedication standard, since these appeal rights are procedural and only kick in if the by-law is being adopted.
Community Benefit Charges
CBCs themselves will now constitute a standalone charge in the development process and serve as the successor to agreements under Section 37 of the Planning Act between a developer and a municipality. Transitional provisions in the Planning Act and the DCA stipulate that the new CBC system will come into effect on September 18, 2022.
Ontario’s Ministry of Municipal Affairs and Housing has framed the CBC system as being geared towards having growth pay for growth while providing predictability for development costs. The CBC definitely improves accountability and predictability, which landowners and developers will welcome, but trades off the limited applicability of the old Section 37 regime for that by broadening the circumstances in which CBCs can be required.
The previous Section 37 regime only permitted a municipality to require “facilities, services or matters” from a land owner in circumstances where a zoning by-law was being adopted to permit increased density and/or height. The new regime permits CBCs to be levied whenever the following, much broader and effectively comprehensive list of development or redevelopment approvals under the Planning Act, the Building Code Act, 1992 or the Condominium Act, 1998 are obtained:
The passing of a zoning by-law or of an amendment to a zoning by-law under Section 34 of the Planning Act;
The approval of a minor variance under Section 45 of the Planning Act;
A conveyance of land to which a by-law passed under subsection 50 (7) of the Planning Act applies;
The approval of a plan of subdivision under section 51 of the Planning Act;
A consent under section 53 of the Planning Act;
The approval of a description under section 9 of the Condominium Act, 1998; or
The issuing of a permit under the Building Code Act, 1992.
Only single and lower-tier municipalities will be able to levy CBCs, which is consistent with the prior Section 37 regime and a municipality with a community planning permit system in place will not be eligible to levy CBCs.
Accountability is established by requiring a municipality to prepare and incorporate into the by-law a CBC strategy that:
Identifies the facilities, services and matters that will be funded by the CBC;
Includes estimates of the amount, type and location of development and redevelopment with respect to which the CBC will be imposed;
Includes estimates of the increase in the need for facilities, services and matters attributable to the anticipated development and redevelopment to which the CBC applies;
Identifies the excess capacity that exists in relation to the facilities, services and matters for the development or redevelopment;
Includes estimates of the extent to which an increase in a facility, service or matter for the development or redevelopment would benefit existing developments;
Includes estimates of the capital costs necessary to provide the facilities, services and matters for the development or redevelopment; and
Identifies any capital grants, subsidies and other contributions made to the municipality or that the council of the municipality anticipates will be made in respect of the capital costs that will be incurred.
Predictability is established by the Regulation’s maximum cap of 4% of the value of the land being developed on CBCs. While this cap is subject to change and relatively easy to increase by a simple amendment to the Regulation, this represents a huge change in predictability for landowners and developers who will know, at least the maximum the CBC costs of development might be. The section 37 benefit process, which was effectively a negotiation between the municipality and the landowner in the past, has always benefitted more experienced developers and landowners with political capital.
Accountability is further enhanced by providing two appeal processes.
Similar to appeals of a by-law that invokes the alternative parkland dedication standard, there will be a forty day period in which landowners may appeal the CBC by-law. Any person or public body, including those with no obligation to pay the CBC, may file an appeal, with the usual provisions for providing reasons found elsewhere in the Planning Act. An interesting possibility, if a municipality chooses not to establish the rate at the maximum rate provided for in the Regulations is the possibility that ratepayers will appeal the rate and ask that it be set to the maximum 4% specified by the Regulation. Whether that is within the Tribunal’s power will need to be determined however, as it is prohibited from “increase[ing] the amount of a community benefits charge that will be payable in any particular case” (emphasis added).
The second appeal is available at the time the CBC is actually levied. The owner of land subject to a CBC may pay the amount of the CBC under protest. Practically speaking, the appeal will usually allege the value of the property upon which the CBC was based was too highly valued by the municipality. As expected, the valuation date for that appraisal is the day before the first day a building permit is issued for the development or redevelopment. The process for making that appeal is different than most other appeals under the Planning Act:
1. The owner must, within thirty days of the payment, provide their own appraisal of the land as of the valuation date. A failure to provide an appraisal within thirty days will result in the payment being deemed to not have been made under protest.
2. A municipality in turn will have forty-five days to provide the owner with its own appraisal, failing which it must refund the difference between the amount of the CBC and the maximum amount calculated on the basis of the owner’s appraisal.
If the appraisals provided by the owner and the municipality do not differ by more than five percent, then the municipality must immediately refund the difference between the amount of the CBC and the maximum amount calculated on the basis of the higher of the two appraisals.
3. If a municipality does provide its own appraisal to the owner, and the appraisals provided by the municipality and the owner differ in value by more than 5%, then the owner has sixty days to provide an appraisal from an appraiser on a list maintained by the municipality.
There must be at least three appraisers on the list maintained by the municipality that are not employees of the municipality, on the council of the municipality, or have any agreement to provide appraisal services to the municipality.
Following this third appraisal, the municipality is required to refund the owner the difference, if any, between the amount of the CBC levied and the 4% cap. If there is no difference between the third appraisal and the CBC, then no refund will be owed. An owner would not be required to make an additional CBC payment if the second or third appraisal process established that the amount of the CBC levied was less than the four per cent cap.
This appeal process, with its strict timelines, gives real teeth to the appeal rights of a landowner because it requires a municipality to take active steps to respond by preparing its own appraisal and if it fails to do so, it is required to immediately pay a refund pursuant to Section 37(36). By contrast the parallel appeal system for parkland dedication relies upon the Tribunal’s schedule and resources to hear the appeal quickly. The landowner often does not get any relief for many months. The 5% rule eliminates marginal disputes and pushes the parties to realistically consider their positions. The obligation that the appraisals be carried out by third party appraisers is helpful in bringing an element of objectivity to the process right at the start. Even though most municipalities will not fail to respond where there is a real discrepancy in values, the early commissioning of appraisals provides the parties with clarity about the issues in dispute and will likely result in the parties being able to negotiate and settle the appeal much more quickly than would be the case without these provisions.
Finally, a number of developments, such as long term care and retirement homes, universities and colleges and non-profit housing, have been specifically exempted from CBCs, in addition to smaller developments which presumably do not meet the threshold of being significant enough to require payment of the CBC (e.g. buildings with less than five storeys or ten residential units in total). The Province’s stated rationale for these exemptions are that these types of “public service” developments are in high demand and/or high need. This approach will allow the Province to implement public policy easily in the future by amendment to the Regulation.
Miller Thomson LLP’s Municipal, Planning & Land Development Group is actively monitoring these changes to development charges and are available to discuss any questions or concerns that you encounter navigating the new CBC structure.