St. Albert city council could soon approve an almost 50 per cent hike in the city's off-site levy rates, despite concerns of local developers who say the increases will eventually be felt by home buyers.
“It just goes off the bottom line,” said Mike Yochim, vice-president of engineering for Landrex. “(Cost) for the developer ... goes to the builder and then in turn, it goes to the homeowner, so eventually it's a ricochet effect on affordability.”
Off-site levies are a method of funding infrastructure development when a municipality can't pay the full cost. Locally, the off-site levy program involves a development company such as Landrex "front-ending" construction costs, with a guarantee other developers who benefit from the infrastructure development will pay city-determined levies in the future.
Each year, after the city calculates the total funds collected from levies, the city and developers are reimbursed portions of the front-ending they previously committed. This year the city will be reimbursed $5.46 million for previous funding commitments, while various developers are being reimbursed a combined total of $621,000. To date, the city is still awaiting reimbursement of over $50 million.
A substantial proposed levy-rate increase for road (transportation) projects, and a less-substantial rate increase for water and sanitary infrastructure projects was presented to council on March 21. Only the stormwater off-site levy rate is set to be decreased.
The increase will bring the off-site levy for road work to $299,797 per hectare, compared to the 2022 rate of $202,118.
The proposed rate hike stems from substantial increases to cost estimates for nearly half of the 27 planned roadway projects in the city, and the corresponding need to account for the interest expected to be charged against the four reserves the city has for each main type of infrastructure, as each is expected to be millions of dollars in the red at various points over the next 25 years.
The four main types of infrastructure the city keeps reserves for are: roads, water, sanitation, and stormwater management. Each reserve is kept to aid future front-ending costs, and to earn interest.
The transportation (road) levy reserve is expected to end the year with a negative balance of almost $100 million, according to the city's annual report.
The expected negative reserve balance stems from, according to the report, the severe increases to cost estimates for outstanding roadway projects, although not all are expected to start or be completed in 2023.
For example, the city increased the cost estimate for road work on Hogan Road from Villeneuve Road to the northern city limit by roughly $13.5 million, bringing the total estimated cost to $25.4 million. Likewise, the cost estimates for the planned twinning of Sir Winston Churchill Drive as well as the twinning of Bellerose Drive from Oakmont to the eastern city limit both increased by over $12 million.
The cost estimate increases stem from the city accounting for road work extending to the new city boundary as a result of last year's land annexation from Sturgeon County, as well as the factoring in of actual roadway expenditures experienced as a result of the high-inflation and supply chain issues seen in 2022, according to the city.
Developers opposed
Prior to the March 21 meeting, council received a letter co-signed by representatives of the Urban Development Institute-Edmonton Metro (UDI-EM), a non-profit advocacy group of development industry leaders, expressing disapproval of the proposed levy-rate increase for roadway projects and asking for more time to work with administration to see if the rate hike can be lowered.
“While we appreciate administration’s recent engagement with industry on this bylaw, the process has not been concluded,” the letter reads. “It is UDI-EM’s position that there are still substantial issues that remain unresolved and require further clarification, discussion, and collaboration.”
“Due to the magnitude and financial ramifications involved for all parties, it is imperative that passage of this bylaw not occur when crucial issues are still being actively discussed between industry and Administration.”
Yochim, who is also chair of the UDI-EM's St. Albert Working Group, was one co-signer of the letter.
Yochim said in an interview he thinks city administration and industry representatives invited to provide feedback on the proposed off-site levy rate increase were not far away from finding a solution, perhaps needing just another month to work together.
“I think what we're asking for is fair,” Yochim said. “I think the administration at the City of St. Albert works very hard at the levies. They're very thorough with it, so I don't see it taking a lot of time with more engagement because they're very good at what they do.”
Yochim said with the proposed rate increase, he calculated developers' overall costs will rise by about 8 per cent. In comparison, Yochim said, the supply chain delays felt by many businesses throughout last year caused overall costs to rise anywhere between 12 to 20 per cent.
The UDI-EM letter sent to council also states in the event that council approved the levy increase, the UDI-EM would consider appealing the new bylaw through the Alberta Land and Property Rights Tribunal, as allowed under the Municipal Government Act.
Killick seeking mutual understanding
The vote to pass the levy rate increase passed first and second reading with only Coun. Mike Killick opposed during the March 21 meeting, but as the bylaw update was not passed on consent during third reading, council will need to debate and vote on third reading again on April 4.
Prior to voting and after over an hour of discussion during the meeting between council, administration, and Susan Keating, the vice president of community development for Melcor Developments, Coun. Ken MacKay said he felt the proposed increase would remain the same regardless of whether industry representatives and administration had more time to discuss the levy rates.
“These discussions are ongoing, and they'll take place anyway,” he said. “I think that the fact that this is reviewed annually should also be something that we can take forward and trust.”
“I don't anticipate we'll see a 48 per cent decrease next year, but I think we are going to be potentially seeing some relief in the near future.”
Echoing MacKay's sentiment during the meeting was Coun. Natalie Joly, who said, “I really think that our process is fair.”
“I think it's well-researched and I agree that the information that we get in the next six months I don't think is going to make a huge difference, if any, to what the rates would be,” Joly said. “I do understand that this is really hard for developers, it's hard for those wanting to enter the housing market, it's hard for those who want to go into a different home, but the reality is this is the cost of today.”
As the lone opposition vote, Killick said even if more time was granted for industry leaders and administration to discuss issues the levy rate increases might remain the same, but both parties would benefit from a better mutual understanding.
“The numbers might not change but the understanding between ourselves and our developers will change,” Killick said.
“I think that would be very helpful to both parties because both parties have to work together for the future.”
