CANMORE – The Town of Canmore and local developers are heading towards a potential legal battle over disagreements on one of the most important municipal revenue collecting bylaws.
Canmore council will potentially approve an amendment to its off-site levy bylaw – which determines who pays for what new infrastructure in the community as new development is built – at its March 5 meeting.
But communication between the Town and area developers shows a process of differing interpretations of what provincial legislation and regulation requires in the cost-sharing for future infrastructure needs nearing $300 million over the next 25 years.
“Growth in the town brings with it a need for infrastructure, and we need to consider that in the context of existing infrastructure in the lifecycle of it, because for water and wastewater it all ends up on the rate of the users of the utility,” said Whitney Smithers, the Town’s general manager of municipal infrastructure. “We want to make sure that we are charging existing ratepayers as well as growth, so development and future ratepayers, equitably and fairly, are commiserate with the infrastructure required by that use.
“We just want to make sure the attribution of those payments is fair across existing and new development. We have to find that balance to represent the interest and needs of all of our stakeholders.”
The proposed bylaw amendment would have levies raised to $273.8 million compared to the existing bylaw sitting at $141.8 million. If the bylaw passes, it will shift $154.4 million to developers whereas the existing one has $84.7 million.
At the heart of contention is determining who pays for what, but also the methodology used to determine the cost-sharing breakdown between the municipality and area developers.
Though growth-related infrastructure is largely covered by developers, there can be benefits to existing taxpayers and residents. An expansion of a reservoir may be needed to accommodate future growth in Three Sisters Mountain Village or a pipeline to better connect Silvertip reservoir to the rest of the Canmore system, but the remainder of the community during a water shortage and a service such as Canmore Fire-Rescue on emergency calls can benefit from the increased supply.
It’s determining that breakdown that can lead to difficult and at times, tense discussion. In Canmore’s case, negotiations began in mid-2022 when the Town was undergoing an update to its Utility Master Plan (UMP) with its consultants from Calgary-based CIMA+.
In a Sept. 12, 2023 letter from Bow Valley Builders and Developers Association (BOWDA) executive director Ian O’Donnell to Smithers, the group raised concerns on how future infrastructure was calculated to be benefitting the community. It raised the issue that the ongoing process had met neither provincial legislation or regulations.
“Any allocation must indicate clearly, quantitatively and in a transparent manner, where the benefit to existing residents lies,” stated the letter, giving 2011 Court of Appeal and 2007 Court of Queen’s Bench cases as examples.
“Ultimately, the Town must provide greater clarity and explanation on the ‘benefitting area’. Methodologies and rationales will be key to ensure support from industry, legal enforceability and fairness for all parties involved as intended under Alberta legislation and court considerations.”
Therese Rogers, the Town’s general manager of corporate services, said the Town has worked with BOWDA since spring 2022 and had multiple engagement sessions to develop the off-site levies model.
She highlighted Town staff’s role of balancing the interests of all stakeholders, which “includes the development community, but it also includes our ratepayers,” in establishing a fair cost-sharing model for infrastructure outlined in the Municipal Government Act and the provincial off-site levies regulation.
“The intention has been to be a real collaborative effort. There’s obviously going to be disagreement, but there’s been collaboration,” said Adam Robertson, the Town’s manager of communications.
The province’s eight-page off-site levy regulations outline factors a municipality must use to calculate a levy, such as statutory plans, policies, studies, anticipated growth, and determining revenue to be collected and benefitting areas.
Smithers said the development forecasting for modelling of the levy is the “relatively easy part” since it looks at area redevelopment and structure plans with unit counts to establish a cost-sharing.
If a single-family home is replacing a single-family home, a levy has already been taken, she said, but if infill is taking place and new units are added they become leviable “since we need to be able to recoup the cost of infrastructure to the extent we’re able to for new development.”
A Jan. 25 from letter BOWDA to Sally Caudill, the Town’s CAO, noted its “significant concerns about these items.”
The letter, from BOWDA chair Brian Talbot and O’Donnell, asked for further discussion with Town staff before council considered passing first reading.
“It is to the benefit of both the Town and the development community to work together on issues of the magnitude found within the off-site levy bylaw amendment,” stated the letter.
In a Feb. 1 letter to Smithers, Talbot and O’Donnell asked for a 30-60 day postponement of the bylaw to continue talks since “it is to the benefit of both the Town and the development community to work together on issues of the magnitude found,” in the bylaw. He said BOWDA “has significant concerns … specifically with the allocation of benefits.”
In the 17-page letter, BOWDA outlines issues in the bylaw not meeting provincial legislation or regulations. It highlighted “BOWDA believes that the 2022 [Utility Master Plan’s] use of remaining lifecycle value is not a reasonable or representative proxy for allocation for benefit arising from new infrastructure.” It asked the Town to consider using the City of Calgary’s methodology for the off-site levy process, which outlines a “shared cost, shared benefit, shared risk.”
An Excel document from BOWDA outlined 10 projects in Calgary such as Northridge pump station and reservoir upgrades, and Forest Lawn Creek and Mountain View pump station upgrades. It highlights the base year, anticipated built-out year, benefit area, population growth and benefitting allocation.
The intent was to show while new growth needs new infrastructure, there’s a benefit allocation to established areas in the community and region and the way the City of Calgary calculated such cost sharing.
The letter stated BOWDA hadn’t seen projects in the levy bylaw, but it believed “projects identified in the 2022 [UMP] will be reflected in the OSL bylaw. As per the 2022 CIMA+ UMP in numerous sections, it was clearly assumed that the Town of Canmore would base their OSL bylaw on input from the 2022 CIMA+ UMP report, as per Town direction.”
While the UMP was accepted for planning purposes by council – rather than approved as in previous additions – it has been updated on at least two different occasions without council approval.
The most up-to-date version is Dec. 12, 2023, which amended the cost-sharing of the Teepee Town waterline upgrade and reduced the Grassi storage reservoir capacity upgrade from $7.59 million to $5.39 million and saw the Bow Valley Trail sewer upgrade go from $600,000 to $1.8 million.
In a breakdown of the allocation methodology in the UMP, BOWDA noted in their reading “the [Town’s] analysis does not examine how the new infrastructure benefits existing Town areas as compared to the new development areas. The assessment should consider the service cost, and also how much of the benefit accrues to existing Town residents and how much of the benefit accrues to the future development areas.”
The letter outlined the off-site levies regulation a municipality can’t make an applicant “fund the cost of the construction of infrastructure … beyond the applicant’s proportional benefit” and “there must be a correlation between the off-site levy and the benefits to new development.”
“What is missing from the 2022 CIMA+ UMP is any determination of benefit from the projects to existing residents,” stated BOWDA’s letter.
The lone project in the UMP with an allocation of benefitting cost is the Grassi booster station waterline.
“If the Town was able to conduct this analysis for [Grassi booster station waterline], it is unclear why it could not be done for other infrastructure,” stated BOWDA’s letter.
At the Feb. 14 council meeting, the Town’s asset management coordinator Peter Kinsberg told council off-site levy negotiations had been an “extensive, challenging and collaborative process.”
He told council costs had significantly increased since the levy bylaw was last updated in 2021, with improved service demand factors, updated development plans, new information for water and sanitary needs, inflation and interest all playing a role.
“As the town of Canmore grows and development continues, new projects become necessary to support this growth,” Kinsberg said. “Having an off-site levy bylaw allows us to ensure that the cost of this new or expanded infrastructure are fairly consistently allocated without having to individually negotiate with each developer or stakeholder.”
In a Feb. 9 letter from Talbot to council and Caudill, he said both sides wanted to ensure the bylaw is “in full compliance with the requirements of the Municipal Government Act.”
He wrote that the levy bylaw should be “fair and consistent with the legislation,” and the two sides should work together to avoid potential legal challenges.
The letter identified 10 projects which BOWDA stated hadn’t been calculated to show benefit to the municipality and the two methodologies used by the Town to calculate the levies for “the allocation of costs for water infrastructure, contrary to the legislated requirements.”
Under the cost allocations in the proposed bylaw, the Town would pay $970,000, developers $24.14 million and Dead Man’s Flats $389,700. The cost splits from BOWDA – using a unit split on some projects – would have the Town pay $5.24 million, developers $18.48 million and Dead Man’s Flats $1.77 million.
The projects range from reservoir booster stations, lift stations, Smith Creek reservoir and a looping pipe to connect Silvertip reservoir to the rest of Canmore’s water system.
While council gave unanimous support of first reading Feb. 14, it directed Town staff to respond to concerns raised by BOWDA in its Feb. 9 letter.
Council went in camera at the meeting for 45 minutes, but asked only one public question of staff and BOWDA’s letter wasn’t included on the public agenda.
Though council could have a public hearing, it’s not legislatively required. A proposed amendment to an off-site levy is required by the MGA to be advertised before second and a possible third reading.
Rogers said they were unable to speak of the Town’s response to BOWDA’s Feb. 9 letter until they are before council March 5. The agenda will have Town staff’s response to BOWDA’s concerns.
“It really is about balancing the multitude of interests we have as a municipality,” Smithers said. “It’s about fairness for the development industry and fairness for ratepayers.”
WHAT ARE OFF-SITE LEVIES
Levies are legislated under the Municipal Government Act (MGA) and can only be applied where projects will benefit future growth. It ultimately establishes a percentage of cost for what’s paid by developers and taxpayers when it benefits residents.
It can be applied for transportation, recreation, water, sewer, stormwater and fire protection services.
Off-site levies are calculated by using the total project costs, dividing the per cent attributed to growth by future remaining development units and getting to the adjusted cost for unit of development.
Future development projections have the cost attributed to growth divided by residential, commercial and hotel units that are each multiplied by their service demand factors to come to the adjusted base rate.
The adjusted base rate is then multiplied by the residential, commercial and hotel service demand factor to come to the respective rates.
The existing service demand factors were updated for future commercial, hotel and residential projects with the Lawrence Grassi Middle School area redevelopment plan (ARP), Palliser Trail area structure plan (ASP), Three Sisters Village ASP and Smith Creek ASP.
Canmore is divided into 17 off-site levy recovery zones, with each zone having a number of units planned for future development such as redevelopment, growth and infill. It uses a 25-year timeframe for calculating rates.
UTILITY MASTER PLAN FEEDS OFF-SITE LEVY DEVELOPMENT
The Utility Master Plan (UMP) serves as the guiding document for infrastructure needed in the next 25 years for the municipality and is updated every five to six years based on evolving community needs.
It outlined $66 million in water treatment infrastructure, with the Town on the hook for a potential $40.5 million, developers $23 million and Dead Man’s Flats $2.5 million.
Sewer projects totalled $28.1 million and the Town would pay $22.8 million, developers $4 million and Dead Man’s Flats $1.28 million.
The 25-year growth projections anticipate 938 more industrial and commercial units, 3,545 extra hotel units, 770 low-density residential units and 3,937 medium to high-density residential units. In the same time period, the master plan estimates an extra 202.7 hectares of land being developed.
A forecasted expense of more than $100 million to upgrade Canmore’s wastewater treatment plant will also be needed in the coming years to meet provincial environmental regulatory needs by 2032. CIMA+ said at budget talks the baseline cost for the Town would be $37 million, with the rest growth-related.
The 2022 UMP version was originally presented to committee of the whole but not for council approval despite prior versions being approved. In 2023, there were at least four different versions used to forecast the master plan and bylaw from the draft report Jan. 19, a final report on May 2 and accepted by council for planning purposes, another final report on June 12 and a subsequent Dec. 12 final report.
Whitney Smithers, the Town’s general manager of municipal infrastructure, said to “some extent, [it’s] a living document,” which is updated as information and infrastructure planning potentially change and evolve with off-site levy modelling.
“The important part for us is understanding the increase in development units because that in part drives our infrastructure needs and that also allows us to know where we can recoup some of that levy,” she said.
Though unit counts were a significant point of contention – with the Court of Appeal upholding the Land and Property Rights Tribunal (LPRT) decisions on Three Sisters Mountain Village Properties Limited (TSMVPL) ASPs handing a legally binding conclusion on the total – the main aspect has been determining benefitting areas.
In thousands of documents obtained by the Outlook in a Freedom of Information and Protection of Privacy request, issues of calculating the exact unit counts between the Town and TSMVPL’s ASPs date back to at least 2016.
The process began in spring of 2022 in working with BOWDA and other stakeholders with multiple engagement sessions to work on both the UMP and develop the off-site levy model.
“There’s been a lot of consultation and engagement. I think the important point is to keep in mind is our role is to balance for all stakeholders,” Therese Rogers, the Town’s general manager of corporate services, said. “That includes the development community, but it also includes our ratepayers and to really understand what is the most fair distribution per the MGA and we believe we’ve followed what we’re required to do from an MGA perspective to look at all those stakeholders and that’s the model we put forward.”
OFF-SITE LEVIES IN OTHER MUNICIPALITIES
The City of St. Albert approved its latest off-site levy bylaw March 2023, which saw a nearly 50 per cent jump in rates.
The significant increase came at the consternation of its development community, which noted it would impact affordability in the community for new housing.
While its development community chose to not go the appeal route, the Urban Development Institute-Edmonton Metro – non-profit advocacy group for development – highlighted its concerns in a letter to council.
“It is UDI-EM’s position that there are still substantial issues that remain unresolved and require further clarification, discussion and collaboration,” stated the letter.
“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.”
In January, City of Calgary council approved its off-site levy bylaw after a more than two-hour debate, which saw an adjusted rate of $609,000 per hectare from the previous $564,000 per hectare. It meant the average levy amount per home would be $22,600 – an increase of $1,700 – with BILD Calgary Region expressing concerns and not supporting the bylaw.
“We are amid a historic crisis of eroding home affordability, and we believe all measures should be taken to ensure the increases in the levy rates are as low as possible,” stated a 60-page Dec. 11, 2023 letter from BILD Calgary Region. “Sufficient time will be needed following the receipt of full and complete responses to our requests for information previously provided by Administration and outlined in our submission to ensure we have done everything we can to reduce the impact of levy increases on home affordability.”
A report by RBC last year outlined construction costs had soared by 51 per cent since the COVID-19 pandemic began, leading to significantly higher home costs. In addition, the report noted a shortage of workers and an increase in development charges have pushed housing to be more expensive.
At a Jan. 16 public hearing, representatives for BILD Calgary Region asked for it to be returned to City staff, highlighting they supported aspects and the methodology but not the way it was applied.
The Federation of Calgary Communities and National Association for Industrial and Office Parks Calgary’s government affairs committee offered letters of support, praising the level of community engagement that began in 2020. It featured 75 working group meetings, 15 off-site level committee meetings, monthly discussions, virtual workshops, surveys and making methodology public.
DEVELOPMENT CHARGES ACROSS THE COUNTRY
Federal housing minister Sean Fraser temporarily pulled the plug on Housing Accelerator Fund money last September for both Burnaby and Surrey after proposed development cost charges were ser for significant increases in Metro Vancouver.
Though both received the funding – a combined $135 million – they had to wait three months as the federal ministry reviewed any potential impact on the charges. As part of the Metro Vancouver charges, below-market units are forgiven for development charges.
Fraser, at a Feb. 19 announcement for Banff receiving $4.66 million in Housing Accelerator Fund money, said the Surrey and Burnaby situation gave “cause for concern” to understand the full impact. He noted their applications did everything possible to expedite housing.
However, he said when it comes to development charges, his ministry “do keep an eye on these things” if a municipality is “looking at significantly increasing the cost of development charges.”
“To the extent that we can ensure communities have the tools they need to get homes built, including building the supporting infrastructure – we want to be good partners – but when it comes to making decisions on who’s going to receive federal subsidies to get more homes built we’re looking at the communities who want to it easier, including an assessment of the impact of development cost charges on housing in a given community,” Fraser said.
In Ontario, Premier Doug Ford’s government removed development charges as part of new legislation designed to help housing affordability and increase supply more quickly. Municipalities in the province, however, gave their ire to the plan, noting the money still needs to be collected and would fall on the back of municipal taxpayers leading to future hefty tax increases.
The province did commit to increasing grant funding, but the funding gap can see hundreds of millions added to municipalities' bottom line.
APPEALING AN OFF-SITE LEVY BYLAW
The MGA was revised as of Jan. 1, 2018, to allow anyone the right to appeal an off-site levy under Section 648(2.1). The appeal, which comes with no cost, would have to be filed within 90 days of the off-site levy being passed. It would eventually have a Land and Property Rights Tribunal hearing.
Though an appeal would lead to a hearing taking place – unless further discussions result in amendments to an off-site levy bylaw – Section 14 of the Off-Site Levies Regulation allows a municipality to impose and collect the level during the appeal process. Any money collected, however, would go into a separate account for each type of facility and not be used until the appeal has been addressed.
The MGA outlines six grounds an appeal can be made, including the off-site levy is unlikely to help future land occupants that are subject to the levy, the area that would benefit from the levy wasn’t determined with regulations outlined in the MGA and the levy isn’t consistent with regulations stated in the MGA.
If an appeal is made, it could be dismissed by the LPRT, but if an appeal is successful the LPRT can order the off-site levy bylaw be fully or partially rescinded and “repassed or amended in a manner determined by the tribunal.”
