Thursday, June 12, 2008

Building fees are too low

Ottawa taxpayers are subsidizing developers by more than $4 million a year because the city charges less for development fees than other Ontario municipalities.

The Ottawa city to take immediate steps to raise the fees and recover the full costs, but Ottawa levies some of the highest fees in the country and any attempt to increase them will lead to higher home prices.

The Ottawa city has about 25 different fees on everything from zoning and engineering to conservation and committee of adjustment procedures. By the time it is all tallied up, a residential subdivision could cost between $35,000 and $40,000 just to get started, while a plan for a condominium often starts at about $12,000.

Ottawa has one of the highest fees in the country and the last thing they need to do is increase them. If they increase fees, buiders are increasing new housing costs. If people think the city is going to hurt builders by increasing fees, they are wrong. It is going to hurt homebuyers.

The city reviews more than 800 development applications a year, and about 1,700 development agreements require monitoring and enforcement that involves several agencies and departments. The auditor general says despite the enormous work and cost involved, little effort is made to recoup the full cost from developers. The planning department has been recovering less than two-thirds of the cost compared with 85% to 100 % in other Ontario cities, and the shortfall costs taxpayers at least $4.3 million a year.

It is a conservative estimate and it could be more in a fee increase.

The Ottawa city doesn't charge the full cost of fees for development projects because the tradition inherited by the new city was to bill developers for 60% of the costs.

Ottawa city staff are "consistently slow" in processing development applications, describing their performance as sub-optimal.

A high Ottawa city official has finally acknowledged a problem that builders have been complaining about for years, and that he is proposing solutions. However, the auditor general is failing to see: the cost-recovery problem is not due to low fees collected by the city, but instead is caused by the much higher staff costs arising out of a bloated bureaucracy.

The fact that they are taking two or three times longer than normal to approve development applications is the reason their costs are high. They don't need more money. We think the auditor general got it right when he said development approvals take much longer, but he has failed to recognize that it is their costs that are too high.

The 2007 audit also confirmed criticism that the city's earlier growth projections were inflated, noting that new figures released last year were more realistic.

It also found that 13% of new building permits issued by the city did not conform to the provincial building code, and while this raises concerns about safety, city staff say the problem, which has to do with the practice of issuing conditional building permits for projects that have not yet been fully vetted, has nothing to do with public safety. Often a builder would be allowed to go ahead with a project even though all the requirements have not yet been met, but city ensures that all conditions are met before the building gets final clearance.

The issue with the building code is about process.

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Blogger Rachelle said...

I'm confused by this. You say Ottawa charges less in development fees than other municipalities in Ontario, but then you say our fees are among the highest in the country. Which is it? And do you really think the average taxpayer should subsidize all forms of development? Can't developers survive in the free market?

8:59 AM  

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