Changes to Alberta’s Off-Site Levies Regulation – Developers Lose Influence
Developers in Alberta face the prospect of losing significant bargaining power in determining off-site levies. Recent amendments to the Off-Site Levies Regulation replace a municipality’s obligation to negotiate levies in good faith with the much weaker obligation to consult. The Off-Site Levies Regulation also shifts the shared responsibility between the municipality and developers for defining existing and future infrastructure requirements to being the municipality’s sole responsibility. A further recent amendment removed a crucial item in OSL negotiations - the opportunity to apportion off-site leviable infrastructure costs among those parties, including the municipality, that benefitted from the development serviced by that infrastructure in proportion to that benefit.
Negotiate vs Consult
In the parlance of public participation, “consult” means the municipality will keep developers informed, acknowledge their concerns, and provide feedback on how those concerns influenced the municipality’s decision. However, the municipality is under no obligation to work with developers to incorporate their concerns into the determination of off-site levies. The Off-Site Levies Regulation (the “New Reg”) incorporates a new section entitled “Consultation” that details this lesser level of public engagement.
Under section 3(1) of the Principles and Criteria for Off-Site Levies Regulation (the “Old Reg”):
In determining the levy costs, the municipality is to retain the flexibility to negotiate the levy in good faith and in a manner that recognizes the unique or special circumstances of the municipality.
“Negotiate” in the spectrum of public engagement is closer to “collaborate”, which means the municipality would look to developers for advice and incorporate that advice into the determination of off-site levies to the maximum extent possible. Losing the right to negotiate levy costs is a significant loss for developers.
No Longer a Shared Responsibility
The Old Reg (Section 3(3)) contains another clear example of collaborative language that the New Reg does away with:
There is a shared responsibility between the municipality and developers for addressing and defining existing and future infrastructure requirements …
The New Reg (section 3(3)) replaces this shared responsibility with a singular responsibility: “The municipality is responsible for addressing and defining existing and future infrastructure and facility requirements.” Losing the right to share in defining infrastructure requirements is a significant loss for developers.
Degree of Benefit of Leviable Infrastructure
The Old Reg contains this provision about apportioning costs in relation to the degree of benefit from Leviable infrastructure:
All beneficiaries of development are to be given the opportunity to participate in the cost of providing and installing infrastructure and facilities in the municipality on an equitable basis related to the degree of benefit.
The Province had the opportunity in its lengthy review of the Municipal Government Act (“MGA”) and regulations to provide direction to municipalities on determining who benefits and to what degree. Unfortunately, the provision (above) in the Old Reg that provided the opportunity to apportion benefit on an equitable basis was simply deleted from the New Reg. Developers in the City of Calgary are disadvantaged in two ways from this deletion. First, The City of Calgary defines the benefitting area for all infrastructure subject to off-site levies (with the exception of storm water infrastructure) to be city-wide. Accordingly, off-site levies paid by a developer in the city’s southeast quadrant could be used to fund infrastructure in the northwest. While this system is administratively easier for the municipality and allows for consistency of levy amounts, it could be difficult to establish the test of benefit for off-site infrastructure that is nowhere proximate to the development for which levies are imposed. A challenge to this practice of city-wide benefitting areas has become more difficult with the deletion of the above provision. Second, a municipality can measurably benefit from development through an increase to its property tax and utility rate-payer base. However, with the deletion of the above provision from the New Reg, the development industry’s argument that this type of municipal benefit should be calculated and factored into the apportionment of leviable infrastructure costs becomes more challenging.
Establishing Base Standards for Facilities
The New Reg has added the following provision:
The municipality has the discretion to establish service levels, minimum building and base standards for the proposed facilities.
In isolation this provision seems relatively benign – of course a municipality should have this discretion. However, in the context where stakeholder input from developers has been denigrated from “negotiate” or “collaborate” to “consult”, the result is that it will become even more difficult for developers to influence the determination of base standards for fire halls or regional recreational facilities, for example.
Developers in Calgary, who were accustomed to paying a “voluntary levy” for this type of infrastructure (fire halls, police stations, libraries, recreation facilities), have consistently advocated for more modest base standards for fire halls, the cost of which can be a barrier to development. With this category of infrastructure now being enshrined in the MGA, municipalities throughout the province have been given the power to impose this community services levy. In October 2019, The City of Calgary formalized its “voluntary levy for community and protective services through an amendments to Off-site Levies Bylaw. Developers throughout the province face the prospect of paying this additional levy while having their bargaining power significantly eroded.
A Bit of History
The last time the MGA was amended to add a new category of infrastructure to off-site levies was December 2003. At that time, section 648 of the MGA was amended to allow an off-site levy for “new or expanded roads required for or impacted by a subdivision or development”. Concurrently, and as a result of effective advocacy by the development industry, the MGA was amended to allow the government to make regulations, “governing the principles and criteria that must be applied by a municipality when establishing an off-site levy”. The Principles and Criteria for Off-Site Levies Regulation came into force in March 2004. Fred Laux, QC, in his Planning Law and Practice in Alberta, states that:
When the roadway levies were included in sec. 648, a corresponding regulation was passed to impose some duties and obligations on councils relative to the process for arriving at and setting the amounts of levies to be imposed.
(Frederick A Laux, Planning Law and Practice in Alberta (Edmonton: Juriliber Limited, 2001) (loose-leave updated 2013, revision 3) ch 14 at 39.)
The New Reg represents a significant retrenchment of a municipality’s duties and obligations to meaningfully engage with the development industry to determine the scope and cost of off-site levies, and the equitable apportionment of the cost leviable infrastructure.
Not All Bad News for Developers Outside of Calgary and Edmonton
Sections 9 and 10 of the New Reg are an improvement to the current process for challenging a municipal off-site levy bylaw. Instead of having to apply to the Court of Queen’s Bench for judicial review, an off-site levy bylaw may be appealed to the Municipal Government Board (now the Land and Property Rights Tribunal) within 30 days of the off-site levy bylaw being passed. The LPRT should provide a forum for appeals that is less formal and less expensive than judicial review, and LPRT panels would typically have more experience with development-related issues.
DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such.