Issues: What Happened To Our DCC Fund? Who Spent It? On What?

By January 3, 2013DCCs, Issues

UPDATED 03/01/12 – MORE COMMENTS RECEIVED – (Editor’s Note: Please read the edifying comments on this post from our City Councillors) Abbotsford has deviated from the norm in several respects in both the amount it charges developers and the kinds of development on which it charges DCCs. It has also taken a strikingly different approach to Municipal Assist Factor and just how its DCC fund is used.

Perhaps the most significant departure the Economic Development Department has achieved has been the fact the City has spent its entire DCC fund and borrowed against it without having managed to fix the majority of the infrastructure problems it has ignored for nearly two decades.

In 2008 Abbotsford Today reported on a case in rural Abbotsford where a rural property owner, living at the end of a gravel road in Bradner was faced with $25,000 in DCCs because the property owner placed a mobile home on the front of the property so that her dying mother could live near them.

When the City of Abbotsford was challenged by neighbouring property owners to explain how the mobile home represented new growth and just what capital costs could possibly be created by the contemplated usage, the Bradner residents were simply told that Abbotsford does things differently than other BC municipalities.

When residents went to the Ministry of Municipal Affairs they were told that, while Abbotsford was the only municipality to put that particular interpretation on the Municipal Act, there was nothing the Ministry could do about it.

While the DCC charges in that particular case were eventually reversed, rural residents and farmers in Abbotsford have been complaining for several years that even temporary structures put up to protect crops from cold weather are being hit with DCC charges.

Economic Development Manager Jay Teichroeb

These decisions were made at a time when development was on the increase, building permits were rising but the Economic Development Department at Abbotsford City Hall was capping DCCs for developers and offering ten year tax breaks.

At a time when money could have been collected to pay for some of the infrastructure work – some of which had been needed since before amalgamation in 1995 and some of which was required in order to update the city’s pipes to a larger size in order to handle the increased capacity needed by the development brought in by tax breaks, City Council spread the collection of DCCs out across rural Abbotsford where it was never intended.

Many have argued that those decisions have meant that, more than any other city in BC, Abbotsford’s current residents are paying for the cost of development as opposed to both the intent and letter of the legislation and best practices governing DCCs.

Abbotsford’s plan for repaying the money it borrowed from its DCC fund,

By spreading the application of DCC charges throughout the City, including rural and agricultural properties and applying DCCs to a variety of small structures built by existing landowners and taxpayers Abbotsford has interpreted The Municipal Charter in a way that seems at odds with both the wording and meaning of The Charter.

According to The Act DCCs are meant to ensure that new development pays for itself rather than leaving the burden of economic growth on the existing landowners and taxpayers.

While most municipalities do recognize the need, in some circumstances, for a small contribution from existing landowners when there is a demonstrable benefit to the entire community of any given development, municipalities, as a rule keep what is known as the Assist Factor at between one and five percent.

Abbotsford’s Assist Factor has risen to 30 percent – unique in the province of BC.

How Did This Happen?

In an October 25, 2012 column Councillor Henry Braun explained:

“While residential water rates rose 80%, the DCC rates remained the same from 2008 to 2012 – there was zero increase. There’s another factor that comes into play regarding DCCs. The Province allows the City to reduce the DCC rate by what is more commonly referred to as the Assist Factor. This provision recognizes that even though a capital project is required by growth and necessary for new residents, existing residents will receive some benefit from the project. In many neighbouring communities, the Assist Factor ranges between 1 and 5%. Historically, this has also been the case in Abbotsford. In other words, the residents pay a very small percentage of some projects required as a result of growth caused by new development.

“Currently, the Assist Factor in Abbotsford is 30%. This means that the residents are paying a 30% subsidy for infrastructure costs that should be borne by the development community that caused the need for new water infrastructure.

‘Whether past Council’s clearly understood this, or not, this policy is simply unfair; is unaffordable; and it’s unsustainable. Residents shouldn’t have to subsidize development by 30%. If the Stave Lake Referendum had been approved by the voters, the Assist Factor would have increased to 90%, while 10% would have been paid by DCC’s – that too is unsustainable.”

Braun has argued the situation must be addressed soon and quickly

Henry Braun

Following is what is needed:

    • DCC program needs to be updated ASAP
    • DCC rates need to be increased to take into account the true cost of development – Focus on what projects will cost and less focus on what the DCC rates are in other jurisdictions
    • DCC assist factor be reduced back to a range of 1 – 5%
    • DCC reserve debt must be repaid ASAP
    • Major capital projects and growth overall need to be slowed down while DCC reserves are replenished to a level commensurate with a City of our size
    • Encourage development in the ‘core areas’ (where roads and other infrastructure are already in place), while discouraging growth in the outlining areas, unless developers are prepared to fully fund the cost of infrastructure required to support those developments, including future downstream costs – perhaps a two-tiered DCC rate structure needs to be put in place

In 2006 Abbotsford’s had $27,610,000 in it’s DCC fund and needed an enormous amount of infrastructure work for its water and sewer systems if it expected to be able to maintain its existing population and accommodate the economic growth it was anticipating.

After an expenditure of $40,743,000 from its DCC fund, today Abbotsford now owes $13,133,000 to the fund and has continued to defer most of the necessary infrastructure work required to maintain its existing population and accommodate the economic growth it is still anticipating. In fact, the aging water infrastructure is the main issue facing the City as developers look elsewhere for cities with adequate water and sewer pipes.

In 2012 building permits and housing starts have dropped and, while it is dealing with the some of the more desperate of its infrastructure problems, the City of Abbotsford continues to defer hundreds of millions of dollars worth of infrastructure upgrades because it lacks the funds to pay for the work.

What the City of Abbotsford does have is an enormous money-losing arena (Abbotsford Entertainment and Sports Centre), a money losing taxpayer-subsidized AHL hockey team (Abbotsford Heat), a $650,000 per year museum (The Reach) and a Council, made up mostly of the same people who have created the current financial disaster, who want to give $17.6 million dollars to the YMCA in order to build a private structure from which taxpayers will see no revenue whatsoever and be provided with a pool we don’t need.

The time is ticking on the money council has borrowed from the citizens’ DCC funds since there are strict guidelines about a) what money can be borrowed for, and b) when it must be paid back.

If the economic indicators of 2012 are any indication of the economic climate ahead, everything the City must accomplish will be made even more difficult without the enormous economic growth around which it seems to have built its entire plan.

Editor’s Note: This is Part 5 of a series on Development Cost Charges in the City of Abbotsford. Series put together by Today Media with the assistance of Lily Kaetler. To read the rest of the series look for DCCs under our Municipal Politics Section or simply Click Here.

Join the discussion 6 Comments

  • Editor says:

    Councillor Dave Loewen Says:

    With respect to the quoted DCC rates, some clarity is in order. At present, the Assist Factor is not 30%, as quoted in Councillor Braun’s article. The Assist Factor for the Joint Water system is 20%, and for the Joint Sewer, it is 15%. These rates were set in November, 2007, when the DCC bylaw update included very significant increases charged to developers (50%+). The bylaw had not been updated for some time, and therefore, to mitigate even greater increases, the Assist Factors were also adjusted upward.

    The DCC bylaws are under review at this time, and it is expected that they will be revised during this calendar year.

  • Editor says:

    Thanks Dave. We’re looking into the 30% quote. In the meantime, isn’t the point that other municipalities have their current residents pay an Assist Factor between 1% and 5% for developers while Abbotsford makes its residents pay (let’s use your figures) between 15% and 20%.

    Can you name another city in the country with an Assist Factor for developers of between 15% and 20%?


  • Editor says:

    Councillor Henry Braun Says:

    Dave is correct, however, he neglected to provide the context which he is well aware of – I wasn’t making this up. On November 9, 2012, our finance department informed Council that there was some confusion surrounding the Assist Factor. Up until that point, the figure of 30% had been used at various meetings by staff, since that is what Council approved in the 2010 DCC Bylaw (30%). However, as it turns out, the Ministry never approved this portion of the Bylaw, which I was not aware (and I suspect most if not all of Council), until November 9, 2012. The Ministry had significant concerns with regard to the Water and Sewer portions of the Bylaw, so in order to allow the Bylaw to get Ministry approval the City agreed to hold the Assist Factor at the 2008 levels for these two programs, which is why it was reduced from 30% to 20%, which the Ministry then approved. I do not have the date for when that approval was given by the Ministry.

    In any event, many staffers, including some in the finance department thought that the Assist Factor was 30% as per the 2010 DCC Bylaw, which is the percentage figure I used in my October blog. Two weeks later Randy Millard in our finance department picked up on the change in the Assist Factor and informed Council and the Senior Management Team via an e-mail dated November 9, 2012.

    Hope that helps clarify

  • Editor says:

    EMun Says:

    Atta Go Dave. Can I paraphrase –

    “Hey you guys!!! Look it wasn’t 30% it was 20%. I know everyone else is 1% but look how good we are relative to what you said about us.

    “No matter that we approved the 30% in our own 2010 DCC Bylaw …

    “No matter that it was the provincial government that forced us not to gouge our citizens the way we wanted to …

    “Oh, and we did increase DCC’s by 50% right after the Plan A vote. We can claim we neglected our DCC rates … which is good right? Not that we are covering up for needing cash to cover the extra Plan A costs!

    “Nope we just had no clue how to manage our DCC’s. That’s much better than the story you published … right?

    “Guys? Look at me making you look dumb!!”

  • Editor says:

    Lily Kaetler Says:

    The City of Abbotsford had over $ 1 billion in building permit values 2004-2008 and building permit fees and DCC’S were collected on this amount, yet, even after having one of the highest DCC rates (residential properties) Abbotsford put the least into its water reserve fund.

    The City was advised by the provincial government in 2006 to increase DCC’S dramatically, but the City did not put the new rates into effect until 2008.

    This meant that, while the City collected $300mil+ in building permit values from 2006 to 2008 no increased DCC rate was applied to developers.

    Why did the City not collect that money from developers?”

  • Editor says:

    A Report from back in 2000 deals with the developing issues of DCCs, infrastructure, Assist Factor, balancing the cost of development between current residents and developers, and the Best Practices Guide (BPG) from the provincial government.

    Staff involved in writing this report seem to be arguing for a balanced approach with increased DCCs to developers, a high but acceptable Assist Factor of 5% and following the principle of having growth pay for itself.

    Someone clearly decided to change things quite drastically after this report.

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