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Bylaw 10/2019 Off-site Levy Bylaw Update & Annual Report (1st, 2nd and 3rd Reading)
Presented by: Tanya Hynes, Supervisor of Long Term Engineering
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RECOMMENDATION(S)
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1. That Bylaw 10/2019, being Amendment 6 to Off-Site Levy Bylaw 30/2013, be read a first time.
2. That Bylaw 10/2019 be read a second time.
3. That unanimous consent be given for consideration of third and final reading of Bylaw 10/2019.
4. That Bylaw 10/2019 be read a third and final time.
5. That $1,188,623 from the City’s Off-Site Levy (OSL) Reimbursement Fund be transferred into the OSL Water Reserve Account.
6. That $2.2M in the current off-site levy receipts held by the City be allocated and administered as indicated in “2018 OSL Receipt Reconciliation Consistent with Approved Council Policy C-P&E-08”, provided as an attachment to the March 18, 2019 agenda report entitled “Off-Site Levy Bylaw Update & Annual Report”.
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PURPOSE OF REPORT
The report summarizes the off-site levy rates updated for the 2019 construction season, and subsequent bylaw amendment to reflect the changes in rates and project lists.
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
N/A
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
1. Infrastructure Planning
• Calculation of levies, the requests to off-set approved projects and ensuring that any work approved is consistent with best practices.
2. Off-Site Levy Program
• Updated annually in Quarter One.
• Recoveries are recommended annually in Quarter One.
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
On February 2, 2015 Council passed the following motion:
(C34-2015)
That Council Policy C-P&E-08, Off-site Levy Framework provided as Attachment 1 to the Agenda Report dated February 2, 2015, be approved.
That Council Policy C-P&E-09, Off-site Levy City Front-Ending Prioritization Criteria, provided as an Attachment to the Agenda Report dated February 2, 2015, be approved.
BACKGROUND AND DISCUSSION
A municipality may collect all or part of the capital dollars needed to construct new infrastructure required to support growth through the imposition of an off-site levy bylaw. The Municipal Government Act (MGA) defines categories of permissible off-site levies:
- New or expanded facilities for the storage, transmission, treatment or supplying of water;
- New or expanded facilities for the treatment, movement or disposal of sanitary sewage;
- New or expanded storm sewer drainage facilities;
- New or expanded roads required for or impacted by a subdivision or development;
- Subject to the regulations, new or expanded transportation infrastructure required to connect, or to improve the connection of, municipal roads to provincial highways resulting from a subdivision or development;
- Land required for or in connection with any of the above described facilities.
In addition to the capital cost of facilities described above, an off-site levy may now be collected to pay for all or part of the capital cost for any of the following purposes, including the cost of any related appurtenances and any land required for or in connection with the purpose:
- New or expanded community recreation facilities;
- New or expanded fire hall facilities;
- New or expanded police station facilities;
- New or expanded libraries.
Currently these new off-site levy categories for recreation facilities, fire hall facilities, police station facilities, and libraries are not included within Bylaw 30/2013 - Offsite Levy.
In accordance with Bylaw 30/2013 - Offsite Levy (the “Bylaw”), the OSL rates are to be reviewed and adjusted by the City Engineer on an annual basis to reflect estimated construction costs, updated interest or carrying costs, and amount of remaining developable land.
Generally, infrastructure projects referenced within the Bylaw are those that have a wider benefit beyond the on-site local improvements to be constructed as a component of a particular proposed development. A developer will “front-end” the cost of those Bylaw projects, and subsequent benefitting developers pay their calculated share of those costs to the City, later to be paid out to the front-ending developer as a reimbursement.
The OSL projects and corresponding benefitting parties specified within the Bylaw must be reviewed and amended by Council no less than every three years, or sooner if required. This is to ensure that the Bylaw remains up-to-date and in accordance with the master plans and policies that guide it.
1. The first step in updating the rates is for Council to approve any changes to the OSL project list referenced in the Bylaw, estimated construction costs, and allocation of costs to benefitting parties.
2. The second step is for Council to approve the reconciliation of all of the OSL receipts collected to date.
Off-Site Levy Update
As part of the annual update of the off-site levy program, the unit rates for projected infrastructure are reviewed to best reflect changes in the current market. The model, as per its functionality, projects infrastructure requirements based on anticipated development. The 2019 rates provide an update for realized construction costs, projected rates in 2019 dollars, and updated long-term timing for infrastructure requirements.
Net Development Area
The Net Development Area (NDA) has been amended from the 2018 OSL Bylaw update. Reductions to the NDA were based on areas included in executed development agreements and an update to the proposed Fowler Way road alignment. The remaining NDA is 975.53 hectares (2,410.6 acres).
Transportation Infrastructure
No additional transportation infrastructure projects were added for 2018. The Bylaw currently includes 34 transportation projects. The allocation for Transportation Projects 13 and 14 has changed from 100% Developer Share to a 50/50 cost share allocation between the City and Developer, as proposed in Capital Project Charter ENG-073 - Fowler Way Design and Construction.
Water Infrastructure
No additional water infrastructure projects were added for 2018. The Bylaw currently includes 15 water infrastructure projects.
Sanitary Infrastructure
When the Bylaw is updated in 2019, costs for an additional constructed sanitary project will be added to the Bylaw:
- Project 16 - South Riel Sanitary Trunk Upgrade.
This was a project that was constructed as an excess capacity improvement in South Riel Stage 1A. In recognition of other developers’ cost sharing obligations for the construction of the excess capacity improvements, the City has collected some cost recoveries for the South Riel Sanitary Trunk Upgrade. The remaining cost of this project is being included in the Bylaw at the request of the developer. The Bylaw includes 12 active sanitary infrastructure projects.
Storm Infrastructure
When the Bylaws is updated in 2019, costs for an additional constructed stormwater project will be added to the Bylaw:
- Project 15 - South Riel Storm Sewer Upgrade
This was a project that was constructed as an excess capacity improvement in South Riel Stage 1A. In recognition of other developers’ cost sharing obligations for the construction of the excess capacity improvements, the City has collected some cost recoveries for the South Riel Storm Sewer Upgrade. The remaining cost of this project is being included in the Bylaw at the request of the developer.
Additionally, one project will be removed from the Bylaw as it does not pertain to capital expenditures:
- Project 14 - Carrot Creek Master Drainage Plan
Any off-site levy funds previously collected for Stormwater Project 14 are redistributed to other stormwater projects within the off-site levy basin from which the off-site levies were originally collected. The Bylaw includes 10 active stormwater infrastructure projects.
2018 Off-Site Levy Update Report
The annual off-site levy update report provides a detailed account of the functionality of the off-site levy program over the previous year, and comparative tables outlining all changes to each project, growth and projected collection reserve throughout the long-term management of the off-site levy program.
- The report provides a detailed account for the identified off-site levy infrastructure constructed during the previous calendar year, as well as the actualized construction costs of the existing built off-site levy environment. The estimated construction costs for each infrastructure project identified within the program is accounted for, as well as the amounts of off-site levies collected.
OSL Reserves
As of December 31, 2018, there is approximately:
- $1.12M in transportation levy reserves;
- $8.352M in water levy reserves;
- $1.07M in sanitary levy reserves; and
- $2,500 in storm levy reserves.
The levy reserves are reflective of several developers offsetting off-site levies while front-ending the construction of qualified OSL infrastructure.
Water Levy Reserve
The City of St. Albert has front-ended different OSL water projects to facilitate growth and upgrade servicing within the City. While the City has front-ended multiple projects, with some projects, only portions of the project were leviable or portions of the project were paid through grants, etc. During the last OSL model update, the OSL model showed a different water reserve balance from the actual OSL water reserve account. In 2018, Engineering Services undertook a self-audit of the OSL water projects to determine if project allocations were correct and whether the City had been over/under reimbursed for past front-ending projects and to resolve the discrepancy between the model and actual money held.
A review of Project 4 - Oakmont Water Supply Main determined the second phase of Project 4 was incorrectly recorded under project expenditures as a 25 City/75 Developer split whereas the OSL model allocation shows it as a 50/50 split between the City and the Developer. This recording error resulted in the City being over reimbursed by $1,188,623. To correct this, $1,188,623 need s to be transferred from the City’s OSL Reimbursement Fund into the OSL Water Reserve, as outlined in Recommendation 5.
Project 4 - Oakmont Water Supply Main
In 1994 St. Albert approached Morinville to utilize spare capacity in the existing Morinville water supply line. This lead to an agreement between the two municipalities where St. Albert could use the spare capacity. In return St. Albert designed and constructed a booster station as part of their Oakmont pumphouse and reservoir project in 1996. In 2008 St. Albert embarked on the complete design of the water supply line and the construction of Phase 1. Phase 2 was constructed in 2013/14 and the project was closed out in 2017.
Project Charter 2012 - Water-008- East St. Albert Water Supply Main - Off-Site Levies - 2012 was funded to complete the East St. Albert water supply line and fulfill the requirements of the water supply agreement with the Town of Morinville. According to the Utility Master Plan, twinning the line to the Oakmont Reservoir and Pump Station through Project 4 - Oakmont Water Supply Main and Project 5 - Oakmont Transmission Main (Phase1) resulted in Oakmont being fed by its own independent fill line. Under the project charter, Project 4 was to be funded 50% by the City and 50% by Developers through the off-site levy program.
During the Off-Site Levy Bylaw update in September 2013, the philosophy of Council funding growth water projects was revised, and under Council Motion C390-2013 it was moved that the new Off-Site Levy Bylaw incorporate the principle that the Water Infrastructure Funding split to be used in determining water infrastructure off-site levy rates be set at 25% (utility)/75%(development) for transmission mains and 0% (utility)/100% (development) for reservoirs.
All of the water projects except for Project 4 have this allocation in the OSL model. It is surmised that this project was not changed as it partially serviced lands not currently within the off-site levy model and the project was funded with the 50/50 allocation prior to the change in 2013. The OSL Model still shows this project as a 50/50 allocation split and model has been collecting levies at this allocation. However, since 2014 the cost of completed work, was recorded as a 25/75 allocation split in the OSL model water expenditures.
This recording error has been corrected in this year’s update.
OSL Receipt Reconciliation
As per the OSL Framework Policy, Administration is recommending the allocation of levy receipts collected to the end of 2018 against any front-ending owing on identified and approved OSL projects under the Bylaw. The total front-ending value for constructed OSL infrastructure, based on updated spent construction values, is $30,539,874.69. The City is required by regulation to manage OSL accounts by each OSL type. Repayment to front-ending parties for the costs of constructing various “leviable” projects referenced in the Bylaw must be made from the applicable OSL account.
Summary of current owed front-ending parties claiming reimbursement
Transportation Infrastructure: $8,870,287.50 is owed to two parties:
- City of St. Albert is owed $8,778,745.19
- Landrex Hunter Ridge Inc. is owed $91,542.31
Water Infrastructure: there are no front-ended projects.
Sanitary Infrastructure: $21,128,463.21 is owed to four parties:
- City of St. Albert is owed $20,498,005.40
- Cidex (Giroux) Corp. is owed $66,834.60
- Beaverbrook St. Albert Ltd. Is owed $103,720.33
- Landrex Hunter Ridge Inc. is owed $126,473.89 (ERN Stage 9)
- Landrex Hunter Ridge Inc. is owed $333,428.99 (ERN Stage 13)
Storm Infrastructure: $541,123.98 is owed to two parties:
- Beaverbrook St. Albert Ltd. Is owed $ 305,060.45
- Landrex Hunter Ridge Inc. is owed $10,464.63 (ERN Stage 8)
- Landrex Hunter Ridge Inc. is owed $104,921.21 (ERN Stage 9)
- Landrex Hunter Ridge Inc. is owed $120,677.69 (ERN Stage 13)
Because the off-site levy program collects calculated levies as development occurs within the City, if there are no owed front-ending parties (or front-ending parties are owed less than the funds that are held within each of the off-site levy reserve accounts) then that money will continue to be held in trust for the program.
As of December 31, 2018, there are multiple front-ending parties that are claiming reimbursement as referenced in the above Council Recommendation 6.
Alternative Disbursement
Alternatively, Council could contemplate an alternative reimbursement payout schematic for sanitary. By reducing the sanitary recoveries to the City of St. Albert by $215K, two private front-ending parties can be paid out for their front-ending components in the sanitary basin. This alternative reimbursement affecting the sanitary funds disbursement is shown below. Under Council Policy C-P&E-08 Off-Site Levy Framework, any front-ending party that is owed $100,000 or less has priority over the pro-rata share basis and is fully reimbursed the following calendar year, subject to available funds. While these two front-ending parties are owed amounts over this threshold, this alternative reimbursement should still be considered.
Sanitary Front- Ending Current Owed Sanitary Disbursement Alternative
Party Front-Ending Value Consistent w/Policy Disbursement
City of St. Albert $20,498,005.40 $979,804.66 $764,575.60
Cidex (Giroux) Corp. $ 66,834.60 $ 66,834.60 $ 66,834.60
Beaverbrook St. Albert Ltd. $ 103,720.33 $ 4,957.83 $103,720.33
Landrex Hunter Ridge Inc. (9) $ 126,473.89 $ 6,045.45 $126,473.89
Landrex Hunter Ridge Inc. (13) $ 333,428.99 $ 15,937.91 $ 12,436.90
Based on the number of OSL infrastructure projects being undertaken by both developers and the City, and the construction costs of these projects, Administration recognizes that an update to the Annual Recovery portion of Council Policy C-P&E-08, Off-site Levy Framework may be required to balance the needs of all stakeholders. It is expected that an update to this policy will be presented for Council’s consideration by end of Q4 2019.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
Administration hosted an information session on February 19, 2019 with a presentation on the Off-Site Levy update, followed by a question and answer period. Attendees were invited to submit comments to Engineering.
The open house was well attended by the development industry and a few members of the public, and the comments collected will be used to inform the long-term management of the Off-Site Levy program.
The Urban Development Institute (UDI) - COSA Technical Committee was unable to provide updated detailed costing for the update. The Technical Committee stated the current market conditions are still quite volatile and subject to significant shifts and it would not be able to provide a response until a later date. Growth Engineering plans to engage with the Technical Committee during 2019 to discuss project costing, updating the Annual Recovery portion of Council Policy C-P&E-08, Off-site Levy Framework, and implementing Complete Streets into the Off-Site Levy model.
IMPLICATIONS OF RECOMMENDATION(S)
Financial:
The financial implications of the Off-Site Levy Bylaw update to the City of St. Albert are complex and are included in the attached report, “City of St. Albert 2018 Off-Site Levy Update”.
The requirement to transfer $1,188,623 from the City’s OSL Reimbursement Fund into the OSL Water Reserve Account will impact the City’s ability to fund other projects from the OSL Reimbursement Fund. An analysis of this fund, that incorporates this adjustment, confirms that the projected future balance of the fund remains in compliance to the governing policy.
Legal / Risk:
The master planning documents used within the Bylaw update underwent substantial consultation with the development industry and the public during their development.
Updating the Bylaw annually ensures the required projects and estimated project costs are reflective of best available information.
Program or Service:
None at this time.
Organizational:
None at this time.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
If Council does not wish to support the recommendations, the following alternatives could be considered:
Alternative 1. That the agenda Off-site Levy Bylaw Update & Annual Report, be received as information.
This would demonstrate Administration completed the annual update report as per Council Policy C-P&E-08 Off-Site Levy Framework. However, this would not update the Bylaw, the number of off-site levy infrastructure projects, or the rates for 2019. It would also not provide Administration with direction on how to allocate the levy receipts collected against any front-ending parties for approved OSL projects.
Alternative 2. That Recommendations 1 through 5 be approved and that Recommendation 6 not be approved as described in 2018 OSL Receipt Reconciliation consistent with Approved Council Policy C-P&E-08, but to consider the pay out alternative for sanitary front-ending parties as described within the agenda report. A recommended motion would be:
“That $2.2M in the current off-site levy receipts held by the City be allocated and administered as per the Alternative Disbursement scenario as described in the agenda report entitled “Off-site Levy Bylaw Update & Annual Report dated March 18, 2019”.
As front-ending costs paid back to the City are transferred into the OSL Reimbursement Fund, reducing the reimbursement amount to the City could impact the financial model used for debenture repayment for other front-ending projects such as Sanitary Project 9 and various transportation projects.
Report Date: March 18, 2019
Author: Tanya Hynes
Department: Engineering Services
Chief Administrative Officer: Kevin Scoble