IN CONTEXT: Why so many Newmarket developer costs go to recreation

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In Context is an occasional feature that provides background information and further clarification on current issues affecting Residents.

Newmarket is updating its development fee charter and maintaining its trend of allocating most developer funds to parks and recreation projects, such as Mulock Park, based on historical spending.

The city plans to update its by-laws by June, with a public hearing scheduled for May 9. Tariffs do not change significantly, with road and water tariffs remaining the same and Parks and Recreation remaining as a major development fee pool.

The fees have recently come under scrutiny from some residents as they were used to fund the $40 million Mulock Park development as opposed to other discretionary uses.

However, provincial legislation means development fees are based on spending over the past decade and cannot be easily redistributed.

“They need to find some kind of benchmark that they can use,” said David Amborski, professor of urban and regional planning at Toronto Metropolitan University. “So that municipalities cannot gild their services or new growth has to pay for higher-quality services.”

All municipalities charge development fees to cover growth-related capital costs for infrastructure such as water, roads and libraries. They are subject to the provincial development levy law, which regulates exactly how levies may be used. It also requires municipalities to charge fees on the previous decade’s spending.

The city said it has $29 million in development fee reserves, of which $15 million is earmarked for recovery. This is because the last construction cost study in 2019 showed high spending on leisure activities over the past decade.

The city spent $4,224 per capita on recreation and parks between 2009 and 2018, the study said.

In comparison, library services cost $327 per capita and fire service services cost $217 per capita.

However, the city found that while recovery is higher than most other categories, it is below citywide engineering, which includes roads and sewage. The city estimated in 2019 that the next 10 years would cost $94.6 million in that category, compared to $58 million for recovery.

Fees are calculated based on these historical expenses, with each development fee split across the different categories. Recreation gets a larger slice of the pie compared to most other city services.

“It’s basically a royalty-based approach to the capital cost of growth,” said Amborski, who lives in Aurora.

Development fees are then deferred and cannot be used except for the services for which the city charges them. However, Amborski said, provincial officials don’t necessarily monitor them closely.

“There’s a lot of leeway there,” he said. “They report every year, but I’m not sure anyone really looks into the report.”

Recreation is also a significant part of development costs for Newmarket’s neighbors. A $14,398 Newmarket Recreation and Parks fee has been charged for single and double residential units since 2019, nearly half of the total $28,902 fee.

Aurora’s 2019 charter provides more than $13,500 between indoor and outdoor recreational services for individual freestanding units, for a total of $23,844.

East Gwillimbury’s 2019 fees are approximately $17,000 between indoor and outdoor recreation for a total cost of $33,885 for single and semi-detached homes.

The City has pledged that most of the cost of Mulock Park will come from these collected development fees. Though they could have reallocated the dollars to other recreation areas and parks, Newmarket Mayor John Taylor has defended the park’s cost and said recreation isn’t missing out elsewhere.

The Development Fees Act prohibits the use of development fees for the acquisition of land for parks. That meant the city couldn’t use them to purchase the Mulock Estate, which cost around $24 million in 2018. The city opted for debt financing instead.

update is coming

Newmarket and the York Region are updating their Development Fee Bylaws this year. The city expects to increase the citywide housing tax rate by 1 percent and lower the non-residential tax rate by 3 percent.

At the regional level, city councilors have debated amending the bylaws to encourage different types of housing, with Taylor arguing for increasing the square footage of the small housing category to build more family-size units.

As for development costs affecting property prices, Amborski said municipalities need to be careful about what they include.

“You have to be careful what impact that could have on housing,” he said. “Some people just see this as a tax on a developer… That’s not the purpose of development fees.”

He argued that one option for municipalities could be to remove water and wastewater from development fees and instead add these capital expenditures to end-user water bills.

He said area-specific development fees are another way to adjust them. Newmarket is currently deploying this in the city’s northwest area around Upper Canada Mall, which excludes water and sewer charges. These are instead provided directly by the developer through planning contracts.

“There are some tools that can be used to make it fairer,” Amborski said