APPENDIX A
Development Charge Credit Policy
Purpose
The development charge credit policy will establish guidelines for applications for and administration and issuance of development charge credits to developer(s), to be implemented through formal agreements with the Town.
In order for a new residential or industrial subdivision to be developed, it is often a requirement that certain public works, internal or external, to the Plan of Subdivision, have to be constructed in order to allow the development to proceed. The public works may include construction of roads, intersections, traffic control signals, watermains, sanitary sewers, stormwater management facilities, etc. included in the Town’s Development Charges Background Study and by-law but shall not include “local services” as defined in the Development Charges Act, 1997.
The design of
the public works is normally carried out by Town staff and its consultant and
then tendered for construction, in accordance with the Town’s capital
expenditure plan, subject to approval of the Town’s capital budget that
year. Funding for capital projects is
obtained, in accordance with the Town of
In some cases, a developer may wish to carry out the work in order to advance the construction of the public works necessary for private development to proceed. In these cases, a Credit Agreement is necessary in order to establish the Town’s obligations to reimburse the developer’s costs in financing the construction and to establish the developer’s obligations for construction. Council approval to the construction and the development charge credit must be obtained prior to the commencement of construction. This is particularly important when the developer is constructing public works and the contract award process may not be as public or transparent as the Town’s tendering process.
The following policy has been designed for efficient administration of the Credit Agreement process. The procedures for administration of Credit Agreement applications are contained in Appendix B. The procedures outlined in Appendix B will be subject to best practices in the industry and minor amendments to this policy can be implemented by the Treasurer without Council approval.
The Town will consider granting
development charge credits for the construction of public works where the
following criteria are met:
Eligibility Requirements
Public works, as described above, may be eligible for Development Charge Credits, including projects for which the detailed design has commenced and even been approved, provided that:
·
The costs for the public works must be included
in the background study that led to the most current Town of
· Council approval must be obtained in advance of commencement of construction, for the developer to construct and obtain development charge credits. If a developer proceeds with construction in advance of receiving development charge credit approval from Council, such works shall be constructed at their own financial risk and expense; and
·
The policies outlined in this document are
applicable to all projects being commenced from and after
Approval
· Council authority for a fixed development charge credit amount shall be obtained prior to the commencement of construction of the public works.
· The amount of the available development charge credit will be limited to the project component of the Town’s development charge by-law (i.e. credits for a road’s construction will be limited to the amount of the development charge capital cost that is attributable to that road in the development charge by-law(s)). Credits will not be in excess of the project’s cost component in the by-law(s).
· Credits will not be extended to other development charge by-laws (i.e. ASDC to TWH or TWS) unless a portion of the project’s capital cost is included in the background study attributable to that by-law.
· Any development charge credit request that exceeds the amount of development charges payable by that developer in respect of its development will be subject to a negotiated long term credit arrangement approved by Council.
· In certain cases, a public works project may have a non-growth component, which cannot be funded through Development Charges. In such instances, the non-growth component is funded through the tax rate or non-DC reserves. If a developer opts to construct public works in advance of the Town’s capital expenditure plan in order to develop their site prior to the Town’s expected timelines, it is important that taxpayers are not burdened by this unanticipated, accelerated cost. Therefore, in order to reduce the burden on the taxpayer by accelerating the payment of the Town’s non-growth component of the cost of the public works, the developer may be required to make a contribution toward the non-growth component cost, when the work is being constructed in advance of the Town’s capital program. Recovery, if any, of the non-growth component by the developer will be subject to a negotiated long term payment arrangement approved by Markham Council.
· The Council approved credit for public works will be set out in the Town’s subdivision or site plan agreements where a single developer is undertaking to complete the work.
· A separate credit agreement will be executed for public works where more than one developer or a developer group is undertaking to complete the work.
· On more straightforward agreements, the Treasurer will have approval authority where the following criteria are met:
o the Town will not be asking for the developer to fund the non-growth share
o the credit request is contained within one by-law (i.e. does not span multiple Areas specific by-laws)
o the capital project is being proposed as a part of a subdivision agreement
o the credit request is equal to (or less than) the indexed cost of the component set forth in the background study
o the credit request is less than $500,000
Security/Financial Obligation:
· Where the developer is undertaking to complete the construction of the public works, the estimated cost of the public works shall be secured by the developer providing a Letter of Credit in an amount equal to 115% of the estimated cost of the public works, in a form satisfactory to the Town Treasurer. The Letter of Credit will also secure payment of the development charge component under consideration for credit. The Letter of Credit will be held until such time as the public works are constructed to the satisfaction of the Town. The Letter of Credit may be reduced for a maintenance period in accordance with the subdivision or other construction or development agreement.
· Where the developer is financing (in whole or in part) the capital work to expedite its completion, the estimated cost of the public works shall be secured by the developer providing a Letter of Credit in an amount equal to 115% of the estimated cost of the public works in a form satisfactory to the Town Treasurer. The Letter of Credit will be drawn upon, at the Town’s discretion, throughout the construction of the work.
Post-Construction Follow Up
· The letter of credit filed to secure the construction of the public works and the payment of development charges, shall not be reduced or returned unless and until the developer satisfies the Town Treasurer that the actual cost to construct the public works is equal to or exceeds the amount of the development charge credit claimed. In the event that the actual cost of the public works is less than the amount of the development Charge credits claimed, the developer shall be required to pay development charges equal to the difference between the credit claimed and the actual cost to construct. If the developer fails to pay the said difference, the Town may draw upon the letter of credit to pay the difference in the development charges owing.
Fees:
· A cost recovery fee applicable to each credit request will be charged for the Engineering, Legal and Finance Departments costs incurred relating to the preparation and administration of the development charge credit agreement. The fee is structured in the following manner:
o A minimum fee of $1,500 shall be required to review a development charge credit request
o A fee equivalent to 1.0% of the value of the public works, to a maximum of $10,000 shall be applicable
o In instances where the Town’s costs to prepare and administer a credit agreement exceed the fee structure set out above, such fees shall be separately quantified and invoiced to the developer.
APPENDIX B
Procedures
Application
· For projects included in the Town’s Capital plan, the developer shall forward a letter of application to the Director of Engineering to consider construction of public works in advance of the Town’s capital expenditure plan and the provision of development charge credits, a minimum of six (6) months prior to expected date for commencement of construction of the public works. A copy of the application should be forwarded to the Manager of Development Finance.
· A complete application package shall include the following:
o Overview of proposed public works
o Rational why the project should be advanced
o Financial summary
·
Council Approval – subject to receipt of the
application package, including any additional materials requested by staff, staff
will submit a report to Council seeking approval or refusal of the development
charge credit request.
Internal Processes
See Appendix C for Flowchart of Internal Processes.
Agreement Stage
Engineering:
· Review each complete application/submission package within 8 weeks of receipt
· Notify Development Finance and Legal of receipt of application
· Compare credit request amount against awarded Town contracts in order to verify the reasonability of pricing. The developer will be required to provide the Town with a tender form in the Town’s format for comparison with recent Town tenders.
· In conjunction with Development Finance and Legal, prepare a report to General Committee seeking Council authorization, or to the delegated approval authority (if applicable), to approve or reject the development charge credit request
Development Finance:
·
Ensure the cost of the public works to be
considered for development charge credits are included in the Town of
· Determine the fixed amount development charge credit for recommendation to Council
· Determine the credit arrangement for recommendation to Council including provisions for long term credits in the event that the developer’s credit claim exceeds the development charges payable in respect of its plan of subdivision or in the event that multiple developers or a landowners group are involved
Legal Services:
· Preparation of the credit agreement or necessary clauses within the subdivision agreement
· A schedule shall be included in the credit agreement detailing either:
o The name of the developers who are entitled to the credit, and the proportionate share of the total that each is entitled to receive; or
o The name of the Trustee to whom all payments will be made, for distribution to those developers beneficially entitled.
· Ensure the work is adequately secured in a form satisfactory to the Town Treasurer.
Public Works Construction
Stage
Engineering:
· Advise Development Finance of any required action (demand and/or release) on the Letters of Credit
·
Ensure that the work is completed in a manner
satisfactory to the Town of
· Verify the actual cost to construct the public works
Development Finance:
· Administer and maintain the Letter of Credit(s)
Credit Redemption Stage
Development Finance:
· Administer the credit agreement in accordance with the Development Charges Act
· Determine credits to be disbursed in future agreements or funds to be released to the Trustee
CREDIT AGREEMENT
PROCESS FLOWCHART APPENDIX C
