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New home construction declined overall in Alberta by 19.3 per cent in January 2016 over last year, according to Statistics Canada. CREB®Now file photo
New home construction declined overall in Alberta by 19.3 per cent in January 2016 over last year, according to Statistics Canada. CREB®Now file photo

June 30, 2015 | CREBNow

The cost of growth

A look at Calgary's development and off-site levies

Hopping in the shower or flushing the toilet is going to take its toll on Calgarians' wallets in coming years.

Calgary's current model for development levies is set to recover 50 per cent of the cost of water drained from your tap or toilet. Storm water is 100 per cent covered by developers.

Yet that's not sustainable for utilities coming to the city down the line – in the form of a $14-million shortfall for new water and sewage infrastructure this year. "When growth happens, it creates a lot of additional costs to the municipality. You need a lot of infrastructure to support new communities," said Kathy Dietrich manager of growth management with the City of Calgary.

"There's always a concern if the charges that we put on the cost of a new development will just end up raising the cost of the homes. But the infrastructure that's needed to serve communities is needed regardless. So you can pay for it through a number of different tools. One of them is off-site levies."

In 2011, an Off-Site Levy Bylaw took effect until a new bylaw would be prepared for the end of this year. That bylaw set out the 50 per cent agreement, aiding the growth of new communities in Calgary, yet adding a new cost to builders.

"Developers were told back in the '90s, 'You don't have to pay for water, we'll take care of it because we'll get it through increases in utility rates, so the utilities will go up to cover the cost of putting the pipes in the ground and paying for the water'", said Guy Huntingford, CEO of Urban Development Institute (UDI).

"As a result, we wanted developers to pay a great deal more for transportation levies, so developers did. And the City came back at the last negotiation in 2011 and said, 'Oops we have a problem, we need you guys to start paying half of the water now and 100 per cent of the storm.' So we did."

With growth comes increased cost, and Huntingford said he doesn't think people appreciate the "meteoric" growth Calgary has seen in the last three years. From 2012 to 2014, Calgary's population increased by more than 67,000 residents to a total population of 1,195,194.

"I don't think people appreciate the enormous pressure that was put on the system from the City's point of view, but also from the industry's point of view trying to continue to build at a furious pace to deal with all these people," said Huntingford.

As a result, Calgarians will see an increase in their annual fees and taxes. This year, residents will spend about $83 on water/wastewater, a number that is expected to grow to more than $105 by 2018.

Last year, City of Calgary general manager Jeff Fielding announced the launch of Build Calgary, a collaboration between City business units and external stakeholders to prioritize Calgary's demand for growth – something Huntingford sees as good news.

"[Build Calgary is] heading up the new off-site levy bylaw negotiations," he said. "They're also looking at all the other growth related infrastructure needs whether it's for redevelopment, commercial, industrial – the whole gamut of issues around growth.

"We wholeheartedly agree with that. We're working with them on not only the new off-site levy bylaw, but those other issues I described."

New communities aren't the only one's feeling the strain of infrastructure issues. Construction is almost complete on the West Memorial Sanitary Trunk – extending from Bowness to Rocky Ridge, touching 24 communities overall – which had been operating at capacity for two years prior.

Because of those constraints, development was closely monitored with new criteria for how planning, development and building applications would be processed in impacted communities.

"To this day, there is some development going on, but nowhere near what would have been if that trunk had been sized correctly or somebody had realized it needed upgrading a long time ago," said Huntingford.

The upgrades, expected to cost $50 million, are expected to be completed for 2017. During construction, the City has installed a structural liner in existing sewers that seals cracks and prevents groundwater and rain seepage.

As for a solution, Huntingford calls it a "delicate balance" of responsible growth infrastructure and ensuring there's affordability in what is being produced by the industry.

"Because if the city off-loads hundreds of thousands of extra costs, it just gets passed to the consumer, which hurts your affordability," he said. "That doesn't do anybody any good in the long run."

Tagged: Calgary | Calgary Real Estate News | construction | Development | infrastructure | levy | off-site levies | UDI | West Memorial Sanitary Trunk

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