Understanding Development Charges
Read time: 3-4 minutes
What are Development Charges?
Development charges are one-time fees imposed by lower and/or upper tier municipalities on land developers, home builders and institutions when they develop or build upon an area of land. The fees are intended to offset the cost of increased municipal services and infrastructure required due to population growth within the municipality, resulting from new development.
The municipality can use development charges to pay for ‘hard services’ such as water, waste management or roads, and ‘soft services’ such as recreation centers, libraries or parks.
The province of Ontario enacted the Development Charge Act (the “Act”) in 1989 and significantly revised it in 1997. The Act sets out the process by which municipalities can create development charge by-laws. Before a municipality can pass a new by-law, they must conduct a background study, detailing how they have predicted and calculated population growth and the increased need for services and infrastructure. New development charge by-laws can be passed within one year of the completion of a background study. A new background study must be completed at least every 5 years.
The Act also dictates which services a municipality can use the revenue from these charges towards.
How Population Growth and Development Charges are Calculated
Background studies provide in-depth calculations on projected population growth and the required increases in services and infrastructures. These studies look at projected residential and non-residential growth, capital service levels and long term capital costs, amongst other things.
While development charges are a complex area of law, it is beneficial to take the time to understand how a municipality calculates their development charges before developing within that municipality. By-laws and background studies can usually be found on a municipality’s website. These studies are often a point at issue in development charge appeals at the Ontario Municipal Board (“OMB”).
Appealing the By-Law
Historically, methods used by municipalities to calculate development charges have not always been consistent with the Act. Development charges can be challenged at the OMB. The by-law can be appealed within 40 days after it is passed by filing a notice of appeal with the OMB.
In cases such as Orangeville and Clarington/Markham the OMB has determined that the municipalities’ methods of calculating population growth were inconsistent with the Act. In Orangeville District Home Builders Assn. v Orangeville (town), 2010 Carswell Ont 2207 (OMB), the Board decided that the method used by the Town to calculate population growth was inconsistent with the Act because the Town was using gross population to predict population growth and the increased need for soft services, producing inaccurate and disproportionate measurements.
Similarly, in Smooth Run Developments Inc. v Clarington (municipality), 2015 Carswell 4155 (OMB), the Board decided that the household method used by the municipality, which calculated population growth using the number of households, was inconsistent with the Act. This is because the household method failed to consider the general decline in household population that had been observed in recent years.
Disputing the Charges
Municipalities can also make mistakes in the calculation of development charges or impose charges that are not entirely consistent with the language and intent of the by-law. If a charge is determined incorrectly, a complaint can be made, in writing, directly to the council of the municipality imposing the charge, within 90 days of the date on which the charge is payable. Once a complaint has been made, the municipal council must have a hearing. The complainant must be given the opportunity to make representations at the hearing. The council’s decision can be appealed to the OMB 40 days after the decision is made.
Please contact Michael Paiva for more information about development charges, or if you require assistance with a potential development charge dispute or appeal.
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