Suburban impact fee to be hiked by 3.5%

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This article was published 11/12/2018 (1961 days ago), so information in it may no longer be current.

The city’s home building industry got bad news Wednesday but said it could have been worse.

City hall will increase the special fee on new residential construction in select suburban areas by 3.5 per cent, effective Jan. 1.

“It’s certainly lower than the five per cent increase of last year but it would be great to have greater transparency on how that increase was determined so we can be confident in the accuracy,” said Lanny McInnes, president of the Manitoba Home Builders Association.

McInnes said a senior civic official contacted him following publication of a story in the Free Press Wednesday that detailed the industry’s concern over city hall’s reluctance to disclose the amount of the increase for 2019.

The official, McInnes said, told him the increase for 2019 would be 3.5 per cent and the announcement would be made official by the end of the week. But McInnes said the industry remains in the dark on how the city arrived at that increase and questions whether it’s justified.

The impact fee is a charge on new residential development in 10 suburban areas, mostly on the city’s fringe. It was approved by council in October 2016 and went into effect the following May. While 10 areas were identified, new residential construction to date has occurred only in six of those areas: Wilkes, Waverley West, Old Kildonan, Transcona West, South St. Boniface, and North Henderson.

The bylaw authorizing the fee also provided for annual increases every Jan. 1, to be determined by the city’s chief financial officer’s calculation of the local construction rate of inflation, to a maximum of five per cent.

Since the fee was imposed, city hall has collected more than $14 million on new residential development – revenue that is retained in a special reserve account pending the outcome of legal challenge launched by the home building industry.

The initial rate in 2017 was $54.73 per square metre ($5,084 per 1,000 square feet) and, following a five per cent increase, it jumped to $57.47 per square metre ($5,338 per thousand square feet) this year.

If the information provided to McInnes is correct, the new increase will add almost another $200 to the cost of a small, 1,000 square foot new home: the rate for 2019 will be $59.48 per square metre, or $5,524.83 per thousand square feet.

Coun. Brian Mayes, chairman of the public works committee, said he had expected the increase to be three per cent, adding that was the figure members of council and department heads were given by the city’s economist in April and it’s the same percentage department heads were instructed to apply for budgeting purposes for capital cost construction for the 2019 budget.

Mayes said Wednesday he had been advised the percentage figure was adjusted upwards as the April figure was considered only “an early estimate.”

McInnes said city hall continues to withhold how it arrives at the construction inflation percentage.

Mayes said the administration told him that McInnes was provided with “the algorithm,” used to determine construction inflation several months ago, though not necessarily all the details.

McInnes said he wasn’t provided an “algorithm” or any kind of mathematical formula, adding that city hall needs to be fully transparent with the industry on this issue.

“The percentage increase amount is higher than inflationary increases for non-residential construction that have been put out by StatsCanada so we’re not entirely sure what goes into that number,” McInnes said.

McInnes said in response to his request for an explanation, he was sent an email in March that stated the inflation figure was calculated by “using actual cost increases from 2016 to 2017 for capital projects in the areas of public works, water and sewer, and buildings,” with figures for public works and water and sewer based on “unit costs from city contracts,” while buildings data was based on information from Statistics Canada.

McInnes said the explanation wasn’t useful or clear and continues to question its accuracy and the relevance of comparing water and sewer projects to home construction.

“That was the ‘algorithm’ they provided and why we continue to ask for transparency around this,” McInnes said.

aldo.santin@freepress.mb.ca