Report To Council From 2000 Shows City Was Warned

By Mike Archer. A report to Abbotsford Council from the year 2000 seems to demonstrate senior staff at the time providing solid financial advice to Council it later ignored.

The report, DEV 220-2000, came from the Staff DCC Committee made up of Ed Regts, Director of Engineering , Richard Danziger, Director of Development Services, Dan Bottrill, Director of Finance and Mark Taylor, Director of Parks & Recreation. It was signed off by City Manager Gary Guthrie.

In the report staff give a detailed explanation and background to Development Cost Charges (DCCs), their impact on City finances, the development community and taxpayers depending on the level the DCC rates are set, the amount of taxpayer assistance to developers (Assist Factor) and the structures and projects to which DCCs are applied.

——————————————————–

The Report

.
The report explains the principles behind DCCs and the provincial government’s Best Practices Guide (BPG) this way:

“As a community grows there are demands made on services, including new roads, sewers and parks. To meet the demands of new growth, most municipalities in British Columbia use Development Cost Charges (DCCs) which are levied against new growth to ensure that growth largely pays for itself.

“The provincial “Development Finance Choices” guide states:

“The combination of community values and practical considerations, lead invariably, to a situation in which the total cost of services is shared by growth itself and the community as a whole. Local governments choose, based on the values and practicalities, which services are to be paid for by development, and which services are to be paid for by the greater community.”

“The exercise of creating a new DCC bylaw requires Council to look at the “values and practicalities” related to who pays for development. The City of Abbotsford has historically chosen to have development pay for itself, as opposed to increasing taxes to pay for development related needs. One of the principles of the 2001 budget is that growth should substantially pay for itself. The City’s current DCC charges adhere to this principle by having development pay for 95% of new infrastructure with a 5% assist factor from existing taxpayers.”

——————————————————–

Developers

.
After explaining the background and purpose of DCCs the report details some of the results of its discussions with stakeholders in the development community, the Fraser Valley Homebuilders Association and the Abbotsford Chamber of Commerce.

The positions of developers and the Chamber are summarized as:

• increased DCC rates could discourage development in the City
• increased rates at this time would be very difficult to absorb because of the depressed nature of the real estate market, especially in the residential area
• the municipality should be willing to share more significantly in the cost of growth because there are tax benefits to growth, especially in the area of commercial and industrial development.
• existing City residents derive benefits from DCC projects, and should share in a greater proportion of the costs
• the City should explore other methods of financing growth, e.g., borrowing money
• increased DCCs will make housing less affordable, especially for the entry level purchaser
• infrastructure should be front ended by the municipality and fees such as DCCs collected at the time the end consumer purchases a product

Staff points out in the report that relatively high DCC rates in Surrey do not seem to be hindering economic growth and development when compared to Langley which had lower DCCs.

The other aspect of DCCs covered in the report was the Municipal Assist Factor which staff advised be kept at 5 percent to encourage development. Most cities keep their Assist Factor between one percent and five percent so Abbotsford, at five percent, was at the high end of the amount of the cost of growth it was asking current residents to pay.

Despite this the Chamber of Commerce and the development community wanted current residents to pay an even higher share of the cost of development.

Options

.
Staff discussed three options in the report:

1) The Best Practices Guide (BPG) Approach which involved maintaining the DCC calculations which derived from the province’s BPG, and were programmed to meet the anticipated growth in the municipality

2) The Modified Approach which included modifying rates by increasing the assist factor and using the old formula to reduce the input for industrial and commercial rates

3) Reduced Program Approach which involved reducing the DCC program, but in doing so acknowledging that the City could not grow as rapidly as it had in the past, even if high growth pressures returned to the municipality

Advice

.
Staff advised Council to adopt the BPG option saying it was the best option because it:

• follows the BPG, thus being consistent with a Provincially developed approach
• follows the principle of growth paying for itself
• meets financial requirements of growth, which the existing rates do not
• is not out of line with other larger municipalities in the Lower Mainland
• is property tax neutral

So – despite the lobbying efforts from the Abbotsford Chamber of Commerce, the Fraser Valley Homebuilders Association and the development community to increase the share of cost of development on existing residents, shifting it away from the development community, borrow money to finance growth and move the payment of DCCs back to the point where the builder actually sells the building, staff urged Council to abide by the letter and the meaning of the Community Charter and the Provincial Best Practices Guide (BPG).

What has happened since the 2000 report?

.
Two things appear to have happened since the 2000 report to Council.

1) Pro-Development Shift. There seems to have been a distinctly pro-development shift in the Economic Development Department since 2000. We have seen every effort on the part of the Economic Develpment Department to keep DCCs low in order to attract business; ten year tax breaks to large enough developers; tax breaks for development around the airport and a gradual shift of the cost of development from developers and members of organizations like the Fraser Valley Home Builders Association and the Abbotsford Chamber of Commerce to current residents.

Whereas staff in 2000 felt a 5 percent Assist Factor was high, Abbotsford’s current Assist Factor for the Joint Water system is 20%, and for the Joint Sewer, it is 15%. This is an enormous figure compared to any other municipality in the Lower Mainland or, as far as Today has been able to find out, anywhere else in the country . Most municipalities protect their current residents from the costs of development by keeping their Assist Factor between one percent and five percent.

An investigation by Today Media revealed that Assist Factors in the rest of the Lower Mainland are almost all at or near one percent. The same investigation revealed that Abbotsford is the only municipality in the Fraser Valley to have borrowed from our DCC fund.

2) Plan A. In a 2007 report to Council from Director of engineering Jim Gordon, Director of Corporate Services Dan Bottrill and Parks and Rec Director Mark Taylor, it was revealed that Abbotsford was beginning to shift the cost of development from new developers to existing property owners through such avenues as increased water and utility rates.

That report also identified the beginning of a situation that was to plague the City until the present day – “DCC Reserves are depleted in roads and parks, and decreasing in sanitary sewer and water. A number of proposed capital projects need to be deferred to avoid funding shortages. As well, a number of sanitary sewer and water projects require adoption of the new bylaws before they can be initiated.”

In six years (2006 – 2012) The City of Abbotsford has gone from having $27,610,000 in its DCC fund to owing its DCC fund $13,133,000. That represents a difference of $40,743,000 since the adoption of Plan A.

The debt and financial obligations taken on by the City of Abbotsford in order to make Plan A a reality, despite all of the advice it has repeatedly received from members of the community, seem to have shoved all other financial considerations aside in the management of City of Abbotsford finances.

And now, caught between a rock and a hard place, Abbotsford has the highest DCC rates in the Fraser Valley, it has borrowed heavily against its DCC fund, it has deferred the vast majority of the infrastructure work the DCC fund was designed for, and its taxes and water rates are as high as they can be without a serious backlash from taxpayers.

The reason the money isn’t currently coming from DCC’s is because we don’t have the infrastructure developers need, so developers aren’t building here and Abbotsford has stopped growing.

For some reason, after the 2000 staff report laid out a solid plan for economic growth in Abbotsford, almost everything the report advised has been ignored and almost all of the wishlist from the Fraser Valley Home Builders, the Abbotsford Chamber of Commerce and the development community has been adopted.

Of those who signed off on the 2000 report only Mark Taylor is still with the City of Abbotsford. He along with Economic Development Manager Jay Teichroeb have been responsible for making Plan A a reality and advising Council on the management of its DCC fund.

In the 2011 municipal election and P3 Water Referendum, Teichroeb, along with then-City Manager Frank Pizzuto and then-Mayor George Peary, told residents that if they didn’t support the idea of having an American multinational corporation build and manage a new water supply at Stave Lake by 2016 economic development in Abbotsford would come to a standstill.

A report released in 2012 showed it was known at the time of those statements that the Abbotsford water crisis would not likely materialize until 2030 and that the City knew that when the dire warnings were given during the referendum.

A report by the Mission Engineering Department later in the year also confirmed that Abbotsford’s Water Crisis was a fiction.

In 2012 all of the Economic Indicators for Abbotsford were on a steady negative path including:

• Real Estate Sales
• Housing Starts
• Building Permits
• Assessments
• Employment

All of these economic indicators have a very strong bearing on the City’s ability to pay its bills and put additional pressure on other sources of revenue – fees and charges, property taxes, water rates etc.

Since the cost of the Abbotsford Heat supply agreement has consistently increased each year since Mayor George Peary signed the deal, there will likely be even more money coming out of municipal coffers to pay the owners of the hockey club if attendance figures continue to decline.

All of the warnings in the 2000 report to council seem to have come true and the desperate attempts to make Plan A a reality seem to have exacerbated an already bad situation.

——

To read to report to Council simply Click Here.

For A PDF copy of the report Click Here.

To read about how the City of Abbotsford has handled DCCs and the relative costs of developent between developers and current residents see our special DCC section under Municipal Politics or simply Click Here.