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Colonnade Development - newsletter july 04 (Page 3)

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Colonnade Development - newsletter july 04
Any resident or business owner
in the City of Ottawa has
recently been witnessing the age
old process of watching our
elected officials try to agree on a
new municipal operating budget,
and the inherent ideological
debates that take place between
the various political factions
from within the current
This of course involves hours of
public meetings where every
interest group imaginable makes
a plea to Council to retain
funding for everything from the
arts, to bike paths, to building
new arenas.Who can't
remember the fanfare and
ceremony when they agreed on
the minimal tax increase and
posed for the cameras and
What's frustrating to us as
commercial developers, and you
as commercial tenants, is that the
average Ottawa homeowner has
no idea whatsoever how much
of municipal costs are borne by
new development and are only
administered by the City's
finance department. For
example, development charges
contributions for the year 2004
are estimated to be
approximately $160 million
dollars, yet nary a mention is
typically made of this and the
developers and new growth are
labeled as the cause of all the
financial limitations of the City
of Ottawa. Although the City
does pay it's proportionate share
depending on the specific
project, the reality is that new
"growth pays for growth" and
through development charges
which are ultimately paid for guessed it ­ new
homebuyers or new commercial
tenants as an added cost
The Development Charges Act
is actually provincial legislation
which was started in the early
1990's to allow municipalities to
recover costs associated with
new growth.That is a simplistic
definition but that is basically
what it entails and it is a
requirement for every
municipality to legislate a new
Development Charges (DC) By-
Law every five years.The
anniversary date is this year and
Ottawa must endorse a new by-
law by mid-July.The by-law
review process requires the City
to identify and quantify various
capital projects over the next 10-
14 years and establish an overall
cost estimate.They then attribute
these costs to be either a
"benefit to existing" or "new
growth", and also allocate a
percentage to non-residential
and residential components. In
parallel, they speculate on the
amount of new residential and
non-residential (commercial)
development that will occur
over the same planning period
and can the calculate the
recoverable DC's as a cost per
housing unit or in our case, a
cost per square foot of building
As you can appreciate this is no
easy task and we certainly would
not want to suggest otherwise ­
but our frustration is again on
how this fact is so often ignored
during these budget
deliberations and discussions on
the health of municipal finances.
Did you know that the new fire
station being planned in the
Barrhaven area will be
completely paid for by DC's? Or
the widening of Maple Grove
Road in Kanata is 100%
recoverable through DC's? How
about that proposed new
pedestrian bridge over the
Rideau Canal in downtown
Ottawa? Almost half will be built
from the proceeds of DC's.
The total 10 year capital projects
budget in the 2004 draft DC by-
law is $6.6 billion dollars and
they include; roads & structures,
water, police, emergency
services, transit & transitway,
park development, recreational
facilities, libraries, child care
facilities, emergency medical
services and assorted other
projects. Of those costs, more
than $2.0 billion is being paid
through DC's by developers.
You don't hear much about that
from City Hall do you?
If we were to develop a new
100,000 square foot office
facility this fall in the former
City of Ottawa, the DC's would
be $850,000 dollars and
represent approximately $1.10 of
the new lease rate. So in fairness,
the City may collect the money
for future projects, we as the
developer may pay it as part of
our project cost, but not
surprisingly the tenant is the
ultimate contributor by way of
your rent payments.The scenario
for new housing is even more
straightforward whereby the
homebuilder literally adds
anywhere from $15,000 to
$20,000 dollars to the price of a
new home.
The new City of Ottawa
Development Charges By-Law
will represent significant increase
to both new housing and
commercial development for
years to come, and those charges
will be directed towards assorted
capital projects that will touch
all of us and make Ottawa a
better city to live, work, start a
business and raise a family.
We just wish that City Hall
would acknowledge that
contribution more often so that
the development community is
not labeled as the cause of our
municipal financial challenges,
but as a significant contributor
to the solution.
Cal Kirkpatrick

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