Report to: General Committee Report
Date:
SUBJECT: Refundable Deposit - Developer Front Ending/ Redistribution Account Reconciliation
PREPARED BY: Brian Lee, Manager, Development Engineering, Ext. 4838
Kevin Ross, Manager, Development Finance, Ext. 2126
RECOMMENDATION:
THAT the December 8, 2008 report entitled “Refundable Deposit - Developer Front Ending/ Redistribution Account Reconciliation” be received;
AND THAT Council authorize Staff to transfer $280,359.91 identified as amounts due to the Town from the Refundable Deposit - Developer Front Ending/ Redistribution account (“the Refundable Deposit Account”) (General Ledger G/L 027 2140009) to the Town accounts identified in this report;
AND THAT all parties who have upfronted funds for works performed, but who cannot be identified, be given the opportunity to apply for a return of any recovered funds;
AND THAT Council authorize Staff to advertise in a nationally circulated newspaper and the Town website for thirty (30) days, amounts for which the payees have not been identified, thereby giving due notice to parties who upfronted for works performed in advance of development within the Town that they may be eligible to apply for a return of any recovered funds which totals $256,038.37;
AND THAT due notice be given of the possible forfeiture of unclaimed funds to the Town’s revenue in said advertisement where recovered funds remain unclaimed;
And that Council authorize Staff, at the end of the advertisement period, to transfer any unclaimed portion of these recovered funds in the Refundable Deposit Account, to a maximum of $256,038.37 to a Corporate Revenue account to be determined by the Town Treasurer;
AND THAT the cost incurred in placing the Public Notice, estimated to be in the range of $8,000 - $14,000 (exclusive of 5% GST) be offset against the deposits to be placed in the Town’s revenue;
AND THAT Council authorize Staff to charge an administration fee equivalent to 5% of the amount to be refunded to claimants, and to utilize the administration fee to recover staff cost associated with refunding these deposits with the remainder to be deposited in the appropriate Engineering, Finance and Legal operating budget accounts;
AND THAT the Treasurer be authorized to pay any claims from the Corporate Revenue account in the event of a future refund claim, which has been substantiated to the Treasurer’s satisfaction;
AND THAT Staff be authorized and directed to do all things necessary to give effect to this resolution.
EXECUTIVE SUMMARY:
Not applicable.
1.
Purpose 2. Background 3. Discussion 4. Financial 5. Others (Strategic,
Affected
Units) 6. Attachment(s)
PURPOSE:
The purpose of this report is to inform Council that the Refundable Deposit Account reconciliation work is completed, and to seek Council’s authority to:
(a) Transfer funds identified as due to the Town into the Town accounts identified in this report;
(b) Advertise for thirty (30) days in a nationally circulated newspaper and the Town website, aimed at generating reimbursement requests for projects upfronted and to institute a refund application process and make refunds to claimants, in the appropriate circumstances, in order to clear outstanding balances from the Refundable Deposit Account;
(c) Transfer any unclaimed refundable deposits at the end of the advertisement period into a Corporate Revenue account to be determined by the Town Treasurer; and
(d) Charge fees equivalent to 5% of the amounts to be refunded to the upfronting owners and claimants to recover staffing costs associated with reconciling the Refundable Deposit account and reimbursing the deposits.
BACKGROUND:
Prior to the Development Charges Act, S.O. 1997, c.27, best effort recovery (“BER”) was a common practice for an owner/developer to upfront finance and oversize infrastructure (“the Upfronting Owner”), and to recover the appropriate share of these costs from an owner/developer who would develop later and would benefit from such oversized infrastructure (“the Benefiting Owners”). The Town, through subdivision and/or site plan agreements, agreed to use its best effort, to recover the proportionate upfronted cost from the Benefiting Owners on behalf of an Upfronting Owner.
Money collected from Benefiting Owners was deposited into a
Refundable Deposit Account, for future reimbursement to the Upfronting
Owners. Up to the end of 2006,
approximately $2.8 million has accumulated in the Refundable Deposit
Account. In 2007, the Town Treasurer
recommended that a working group from the Finance, Legal and
OPTIONS/ DISCUSSION:
As a result of this reconciliation exercise, transactions in the account as of June 30, 2008 can be classified into three groups:
Group 1 – Refundable to Upfronting Owners $2,277,803.44
Group 2 – Refundable to the Town $280,359.91
Group 3 – Payees/Purpose not identified $256,038.37
Total: $2,814,201.72
The details of
each group are available for review in the
1. Group 1: The Upfronting Owners have been identified in the reconciliation process. The monies, less 5% administration fees, will be reimbursed after the appropriate legal search is completed and releases are provided by the Upfronting Owners. If such releases cannot be obtained, the funds will be transferred to a Corporate Revenue Account.
2. Group 2: This represents amounts recovered by the Town from developers for various purposes. The distribution of the deposits are as follows:
i. Developer contribution of $66,781.16 to the design and construction of the Rodick Road Bridge. This amount will be transferred to the Rodick Road Area Specific Development Charge Reserve account (a/c# 089 30017001), and
ii.
Recoveries from Benefiting
Owners for infrastructure improvements paid for by the Town in the amount of
$213,578.75. Staff will transfer $30,000.00
of this amount to recover associated full time contract staffing costs to
account #031 2220001 with the remainder totaling $183,578.75 to the Pre-DCA
3. Group 3: This amount was collected from Benefiting Owners over time but it is unclear from Town’s records who the Upfronting Owners are.
Staff is seeking Council’s approval to advertise this unidentifiable portion for thirty (30) days in a nationally circulated newspaper and The Town of Markham’s website, in order to alert any Upfronting Owner to make a claim. Within this designated period, a person or company can make a claim to the Director of Engineering.
Staff is also seeking Council’s approval to transfer, at the end of the advertisement period, any unclaimed portion into a Corporate Revenue Account to be determined by the Town Treasurer. Where an amount is under investigation or disputed between the Town and a claimant, the amount will remain the Refundable Deposit Account until the matter is satisfactorily resolved.
It is also recommended that the Treasurer be authorized to withdraw monies from the said Corporate Revenue Account to satisfy future reimbursement claims, if any, which may be requested and substantiated after this transfer is effected.
FINANCIAL CONSIDERATIONS:
The newspaper/internet notice and application process provides a method of reaching owners/developers who upfronted works which benefitted future developments, and will allow for the reimbursement of monies to these owners/developers. Applicants successful in obtaining a refund through this process will be required to sign a release and indemnity to the satisfaction of the Town Solicitor.
A preliminary assessment has revealed that the cost to run the advertisement should be the main financial factor in this proposal and this can be estimated to be in the range of $8,000 to $14,000. The cost of advertising the Public Notice (exclusive of 5% GST) is proposed to be offset against the transferred balances.
It is recommended that an administration fee equivalent to 5% of the amount to be refunded to the Upfronting Owners be charged to recover staffing costs associated with research and other preparation involved in reimbursing the deposits dating back, in some cases, over 10 years. The administration fee is based on staff’s estimate of the time spent researching the refundable deposit accounts and the time to be spent in implementing refunds of those accounts, based on the rates set out in the Town’s Fee By-law.
It is also recommended that the Treasurer be authorized to withdraw monies from the said Corporate Revenue Account to satisfy future substantiated refund claims, if any, which may be requested after this transfer is effected.
ALIGNMENT WITH STRATEGIC PRIORITIES:
Not Applicable
DEPARTMENTS CONSULTED AND AFFECTED:
The Legal
Department has provided advice on this refunding principal and procedure, and
its suggestions are reflected in this report.
This report was prepared jointly by the
________________________ ________________________
Director of
________________________ ________________________
Jim Baird, Andy Taylor
Commissioner of Development Services Commissioner of Corporate Services
________________________
Catherine Conrad
Town Solicitor
ATTACHMENTS:
Not Applicable