Report to: General
Committee                                              Date
of Meeting: January 15, 2007

SUBJECT:                          1375504
Ontario Inc, Development Charges Credit Request at 7778 Kennedy Road

PREPARED BY:               Jennifer
Nelson, extension 2640

RECOMMENDATION:

That the report
titled “1375504 Ontario Inc, Development Charges Credit Request at 7778 Kennedy Road”
be received;

And That Council
not provide a development charge credit or exemption to 1375504 Ontario Inc;

And That Council
not provide a refund, to 1375504 Ontario Inc, for lot levies paid pursuant to
the Site Plan Control Agreement dated October 22, 1991 between the Town of
Markham and 777333 Ontario Limited.

1. Purpose                     2. Background                      3. Discussion                        4.
Financial

5. Others
(Environmental, Accessibility, Engage 21st, Affected Units)             6. Attachment(s)

PURPOSE:

This report was
prepared in response to a request by Calearth International Developments Inc.
with respect to the payment of development charges at 7778 Kennedy Road
(Attachment A) and in response to the deputation made to Council at the October
16, 2006 General Committee Meeting.

BACKGROUND:

On October 22, 1991 the Town
entered into a site plan control agreement with 777333 Ontario Limited which
proposed the construction of 123 non-profit residential apartment units and up
to 860m2 of commercial floor space at 7778 Kennedy Road.  The intent was to construct two
buildings: Building “A” being a six storey building comprised of 95
residential apartment units; Building “B” being comprised of 28
residential apartment units and 860m2 of commercial floor
space.  These two buildings were to be
constructed for the purpose of Non-Profit Housing and were approved by the
Ministry of Housing.

The total levies and
fees assessed to this development were as follows:

The Town’s
fees and levies of $670,442 were comprised of $63,222 in fees, and $607,220 in
levies. The recoveries of $245,058 represented 777333 Ontario Ltd’s proportionate
share of completed work that was upfronted by other developers.  The Town has an obligation to forward
the funds to those developers who completed the works.

In July 1991, a
representative from 777333 Ontario Ltd made a deputation to Council requesting
relief from the payment of fees and levies.  Council, at its meeting of July 9, 1991 approved a
reduction in the Town’s fees and levies by an amount equal to the fair
market value of a parcel of land on the northern limit of the property, in
exchange for the transfer of the parcel of land to the Town.  The Town’s intent was to use this
parcel of land for the future extension of Deverill Court.  Therefore, the only amount payable pursuant
to the agreement, permitting the 123 non-profit units and commercial space, was
$25,000.

Hagerman Corners
Community Homes Inc. constructed Building “A” but never constructed
Building “B”.  The
parcel of land where Building “B” was to be constructed was severed
and subsequently sold to 1375504 Ontario Inc.

Mr. Gerry Mintz
of Calearth International Development Inc has been retained to represent
1375504 Ontario Inc, the current owner of 7778 Kennedy Road.  Staff met with Mr. Gerry Mintz on
numerous occasions to review his clients request for:

◙
a credit or exemption from the payment of
development charges in respect of the future development of Building
“B”;

◙
a refund for lot levies prepaid on Building
“B”.

Credit /
Exemption from the payment of Development Charges

In discussion
with Staff, Mr. Mintz made the request that a credit or exemption from the
payment of development charges should be granted on the basis that lot levies
were paid for Building “B” in the October 22, 1991 site plan
control agreement.

Staff advised Mr.
Mintz that his client had three opportunities to request a credit or exemption for
lot levies previously paid.  These
opportunities are noted below.

The Development Charges Act 1997, and its associated O. Reg
82/98 provided an opportunity for landowners to make an application for a
credit on or before October
1, 1999 in respect of fees paid relating to development under
an agreement.  The Town has no
record of an application from 1375504 Ontario Inc.

The Town of Markham
Development Charge By-laws 147-1999, 148-1999 and
151-1999 included provisions for credits for lot levies previously paid,
provided a building permit was issued prior to December 31, 2003.  The landowner did make an incomplete
application for a building permit prior to the deadline, however a
complete application was never submitted to the Building Department.  Subsequently, the building permit
application was cancelled and the building has not been constructed.

On January
21, 2004 the Town notified the solicitor representing 1375504
Ontario Inc., that the Town’s policy in respect of development
charge exemptions was being reviewed.
The process undertaken to update the Development Charge by-laws
was  a public process.  Public meetings were held on August 3rd, 2004 and August 31st, 2004.  The Town has no record of any
objections being made to the discontinuation of the exemption from any individual
representing 1375504 Ontario Inc.

As 1375504
Ontario Inc. did not avail themselves of the opportunity to obtain a credit or
exemption under any of the three circumstances listed above and as there is
currently no authority to grant a credit or exemption, Staff does not recommend
a credit or exemption be granted from the payment of Development Charges.

In addition, the
Town entered into a release with respect to the site plan approval, on November 22, 1994, with
777333 Ontario Limited.  Section
4(h) of the amended agreement stated that the owner covenants and agrees to
“acknowledge that an area specific by-law for this area (Northwest Hagerman’s Corners) will be required and
the Owner further agrees to pay the charges upon passing of the by-law by the
Town”.  It is clear from this
paragraph, that the Town always intended to assess development charges on
Building “B” regardless of the fact that lot levies had been
previously paid.

Refund for Lot Levies Prepaid on Building “B”

In discussion
with Staff, Mr. Mintz also made the request that a refund be granted on the basis
that lot levies paid in the October
22, 1991 site plan control agreement were for 123 residential units
and 860m2 of commercial floor space and only 82 units were
constructed.  Mr. Mintz provided
Staff with a calculation suggesting a refund of $442,386 be granted for the
prepayment of lot levies on the 41 unconstructed units (123 – 82) and the
accumulated interest from 1991 to current.

As previously
noted, the total fees and levies assessed on the October 22, 1991 site plan control agreement
between the Town and 777333 Ontario Limited was $915,500.  In July of 1991, Council authorized a
land credit of $890,500 to 777333 Ontario Limited.  The amount of the land credit was based
on the fair market value of a parcel of land being conveyed to the Town.  The funds actually received by the Town
pursuant to this agreement was $25,000
($915,500 - $890,500).

It should also be
noted that the purpose for collecting lot levies was to ensure that adequate
services were put in place to support the development that was anticipated to
occur.  It cannot be assumed that
because Building “B” was never constructed, that the Town hasn’t
already incurred the cost of implementing the services necessary to support the
development.

As a credit was
provided for the majority of all fees and levies under the original site plan
control agreement, Staff does not recommend any further credit be provided to
1375504 Ontario Limited.

In any event, should
Council agree to provide a refund for lot levies prepaid on 41 apartment units,
the refund would not necessarily be payable to the current registered owner, as
they were not the owner who made the original payment.  The current owner would have to satisfy
the Town that it was entitled to any such refund.

FINANCIAL CONSIDERATIONS:

Development
Charge Exemption

1375504 Ontario
Inc has proposed the construction of 54 residential apartment units at 7778 Kennedy Road.

The Town of Markham Town Wide Hard and
Town Wide Soft development charges are calculated based on unit type.  The development charge for apartment
units is determined by whether the unit contains one bedroom or more than one
bedroom.  Based on the rates in
affect at July 1, 2006,
the Town of Markham
development charges that will be assessed on this development would range from a
minimum of $213,274 to a maximum of $322,030, depending on the mix of one
bedroom and more than one bedroom units. Area Specific Development Charges are
not currently in effect for this development.

Neither the
Development Charges Act nor the Town’s Development Charge by-laws permit
a credit or exemption to be granted.

Refund of
Prepaid Lot Levies

The Site Plan
Control Agreement dated October
22, 1991 proposed a development of two buildings containing a total
of 123 residential units and 860m2 of commercial floorspace.  The total lot levies included in the
agreement was $670,442 or $5,451 per residential unit.

Only one building
was constructed and contained 82 non-profit residential apartment units.   The request for a refund for lot
levies pre-paid on 41 units (123 proposed units – 82 constructed units)
would equate to $223,491 (41 units x $5,451).

As there was full
opportunity to apply for credits, and Mr. Mintz’ clients failed to do so,
and because the purpose for collecting lot levies was to ensure that adequate
services were put in place to support future development, Staff does not
recommend that a refund be given for lot levies assessed on the 41
unconstructed units.

The agreement by Council to provide either a
credit/exemption of development charges or a refund of lot levies would set a
precedent for other developments to make a similar request.  Staff cannot definitively advise on the
number of similar situations that may exist nor the exact potential financial
impact.  Based on the limited
information that is available staff have estimated that the financial impact of
such a precedent would be a minimum of $2.7 million.

RECOMMENDED

BY:    ________________________          ________________________

Barb Cribbett, Treasurer                     Andy
Taylor, Commissioner

Corporate
Services

ATTACHMENTS:

Attachment
A:  Correspondence received by the
Clerk’s Office from Calearth International Development Inc

Attachment
B:  Correspondence sent to Calearth
International Development Inc