Off-site Levies Explained

There is a lot of confusion around off-site levies and rightly so. Stakeholders, including the Chamber of Commerce, met from April 2012 to June 2013 to review the scope, plans, infrastructure projects, allocations and costs and have gone through continual research and advocacy on the issue since that time. I can appreciate that without extensive involvement in consultations and research, it is a very difficult issue to fully comprehend, however I will attempt to explain it in brief.

An off-site levy helps pay for roads and municipal utility systems, such as water, storm sewer and sanitary sewage required outside or “off” the site of a particular development or subdivision that will directly or indirectly serve that development. Developers pay for the full cost of infrastructure within their development site, including roads and utility infrastructure, but are assisting the City by contributing to the costs of growth by paying a “levy” towards capital costs related to things like storage, transmission or treatment of supplying water; new or expanded facilities for the treatment, movement or disposal of sanitary sewage; new or expanded storm sewer drainage and new or expanded roads required for growth.

Though provincial legislation allows for this additional levy to be collected, every municipality needs to consider whether this provision will be adopted and implemented, and to what extent it will collect these fees through bylaw. This potential additional development cost must be assessed as to whether there will truly be a significant and enduring benefit to a specific development area or whether the project is for the benefit of the entire community.

Many smaller, rural communities have difficulty paying for public facilities and roads due to a smaller tax base and may need additional support for capital projects, while larger metropolitan centres tend to build facilities for specific communities within the City that can be attributed to a specific development area that would have no attributable or enduring benefit to the rest of the City. However in mid-sized cities such as Medicine Hat, public facilities, major connector routes or water treatment supply are generally seen as a taxpayer supported cost and are viewed to be a benefit to the community as a whole. When levied on business, additional costs such as these could be viewed as an added regulatory and cost burden that is being imposed, offloading municipal costs onto the backs of new business investment, development and even business expansions.

We also have to look at how rising costs at all levels of Government, coupled with regulatory burdens may be impacting our business community and what that may mean for our community as a whole. Through statistical data, we can see a correlation between increasing regulations, rising costs and the state of our economy in relation to overall business growth. In 2008, we had our 10 year high with 2,523 businesses, compared to a 10 year low in 2017 of 2,263 businesses.

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As a municipality, we must recognize we need growth to occur in our community to help with the distribution of taxes, as the costs continue to rise for City services and taxes continue to increase year over year. More specifically, we need commercial/industrial growth to occur, largely due to the benefit in tax revenues, employment opportunities, economic diversification and income generation within our community. As a simple example from a revenue standpoint, non-residential properties pay a tax rate of over two times the residential tax rate. Our businesses provide jobs, opportunities, quality of life and growth in our community.

Development benefits a municipality through creation of an expanded tax base and ultimately a reduced tax burden because of the growth and share in the tax liability. The creation of commercial development and a new residential tax base will ultimately benefit the community as a whole, contribute to the tax base and will motivate, rather than stagnate, growth.

With consideration that municipalities vary in their methodology and each determine the benefit and cost to the developer when it comes to off-site costs, the City of Medicine Hat must consider all of the implications of increased costs and potential benefit that can be realized through careful evaluation and consideration of the offsite levy bylaw and municipal assist program. Both the bylaw and municipal assist are currently under review by the City, as the 2018 rates and current assist will expire at the end of this year. As a Chamber, we are encouraging the City to consider the best methodology and best practice for our municipality and have been there to provide the research and advocacy to assist in this decision making process along the way.

View our previous article from 2015 here and our updated policy position on development benefit considerations for the Off-Site Levy Bylaw here.