new development keeps taxes and other costs down

[John Zeger]

One of the myths of growth is that new development will keep down taxes and other costs in the community. This couldn't be further from the truth, in fact the opposite is true. That's because development requires water, sewage treatment, road maintenance, police and fire protection, garbage pick-up and a host of other public services. And new development does not keep housing costs down as some would argue, but actually causes them to increase.

In the July 15, 2005 issue of the Kelowna Daily Courier, the front page headline article is "Charges to Drive Housing Prices Up." It goes on to describe how the planned increases in development cost charges (DCC's) "to fund rapid development in Kelowna" will add $7,000 to the price of a new home as this increase in DCC's will simply be passed on to consumers. So the cost to the community in this case is higher housing costs for all. Some would argue that increasing the supply of new housing is necessary to keep housing costs down, but it is obvious from this example that additional development actually costs the community more and will show up somewhere on the ledger in this case in the form of higher housing costs.

www.kelownadailycourier.ca/archive/2005/07/15/stories/8218_full.phpt?latest_date=2005/07/15

[Rick Shea]

To relate this to another thread, I note that the new aquatic centre will increase residential property taxes. I'm not complaining about the aquatic centre, just pointing out an example of how population growth drives demand for services, which we then all pay for.

One other critical issue is the hidden costs we all pay for -- simple things like increased cleaning costs due to all the dust created in new developments (a real problem in my area), increasing the number of employees at city hall to deal with applications and permits and so on, and a host of others as well.

If new development kept taxes down, then why are our taxes so much more than the undeveloped areas? It's just another lie from the pro-growth propagandists.

[DuaneT]

“One of the myths of growth is that new development will keep down taxes and other costs in the community. This couldn't be further from the truth, in fact the opposite is true. That's because development requires water, sewage treatment, road maintenance, police and fire protection, garbage pick-up and a host of other public services. And new development does not keep housing costs down as some would argue, but actually causes them to increase.

In the July 15, 2005 issue of the Kelowna Daily Courier, the front page headline article is "Charges to Drive Housing Prices Up." It goes on to describe how the planned increases in development cost charges (DCC's) "to fund rapid development in Kelowna" will add $7,000 to the price of a new home as this increase in DCC's will simply be passed on to consumers. So the cost to the community in this case is higher housing costs for all. Some would argue that increasing the supply of new housing is necessary to keep housing costs down, but it is obvious from this example that additional development actually costs the community more and will show up somewhere on leger in this case in the form of higher housing costs.”



Once again, John Zeger, you are distorting the truth. The reason that the DCC’s are going up is due to the incredible rise in oil and other construction materials ( steel, labour, etc. ) that are driving up the capital cost of projects throughout the city. Also, the DCC’s have not risen in a number of years and are not indexed to the cost of living – something that the City Council wonder if was possible. Please don’t distort the truth – either tell the whole story or tell nothing at all!

[John Zeger]

As I have long suspected, Duane, you don't know how to read and understand. Because if you did you would have read on the link provided to the Daily Courier that the increase in DCC's was necessary "to fund rapid growth. ... The development cost charges fund the cost of new roads, sidewalks, sewers, water lines, electricity, parks in new areas as well as generally helping pay for wider community growth." To make it easy for you, Duane, growth costs money and everyone ends up paying for it in one way or another.

[DuaneT]

Well, John Zeger, than as John Skrotzki points out to me, you must not have been paying attention at the Monday July 11th Council meeting. While it is partially true what you say – it is NOT the whole story - which you purposely withheld in your post (since you were at the meeting you would have heard the presentation). The majority of the cost increases are due to “changes in land and construction costs.” During the presentation it was noted that the LARGEST increases came from the construction costs due to higher oil prices filtering down to construction materials for roads ( which have a high content of oil and the large trucks that construct them ) and the cost of PVC pipes ( oil again ). Also, the cost of steel is going through the roof due mainly to the construction boom IN China. Also, the Province has removed a commitment of 21 million for the Central Okanagan Bypass leading to further city cost. Here is the outline provided by the committee:

The 20-Year Servicing Plan and Financing Strategy was presented to Council in May, 2003 and became effective in February, 2004.

The recommended 2005 update to the 2020 Servicing Plan reflects changes in land and construction costs, updated completed projects, some scope and funding source changes and more detailed engineering on a number of projects. The proposed infrastructure works are largely the same except for the following key changes:

(a) TRANSPORTATION – The updated plan largely includes the same roads as the current plan, the exception being elimination of Richter 1 (KLO-Sutherland). Key changes are inclusion of the Roads Task Force recommendations, reallocation of provincial funding to taxation for the Central Okanagan Bypass, an increase to 4 lanes for Gordon 5 (Mission Creek to Casorso) and 5B (Bridge), updated construction/land acquisition costs and refined land restoration costs.


(b) WATER – The current 2020 Plan calls for $29.1 Million in expenditures on pipes and pumping systems to support growth while the 2020 update identifies $36.4 Million of expenditures. This reflects increases in material supply costs, installation costs and road restoration costs as well as the additional costs of Ultraviolet equipment at the Cedar Creek pump station.

(c) WASTEWATER – The updated plan reflects an increase in Trunk costs of 12% and Treatment costs of 14%. This is based on increases in general construction costs, granular material costs, costs of hauling gravel to the South end and costs of PVC pipe.

(d) PARKS – The updated plan retains the current standard of 2.2 hectares of park per 1,000 population. The cost of the updated 2020 program is $87.3 Million, an increase of 35.5 %. Updated costs are based on the 2005 Assessment Review of land acquisition costs and specific site detail costs.

The total costs of providing this infrastructure in the 2020 Plan update is $630.1 Million as compared to $490.1 Million for the current 2020 program. This increase is a result of the changes outlined above. Additional information on the programs is provided in the attached schedules which will be available to stakeholders and the public and in a PowerPoint presentation to be made at the July 11th regular Council meeting.

[John Zeger]

Growing infrastructure costs are due to the need for a larger infrastructure which is necessary to meet the demands of a greater population. Q.E.D.

[Rick Shea]

The sad part is that these costs of development due to the infrastructure deficits are mainly passed along to those of us who were already here. As I said, this unfunded liability constitutes a subsidy to developers, and I am glad to see the proposal to increase the DCC's.

My prediction: despite any increases, DCC's will never pay for all the real costs of growth pollution.

[John Zeger]

I agree and would almost venture to say that the increase in DCCs should even be greater to cover all the real costs of development to the community.

[Rick Shea]

The DCC open house happens today at City Hall, from 3 to 8 p.m. Presentations will be made from 5 to 7 p.m.

[Rick Shea]

Letter sent to The Courier today.

In his column in your November 8th edition, Ron Seymour claims in the headline that housing “(a)ffordability is being undermined” by increases in development cost charges and by increased taxes.

In the same column, Mr. Seymour is critical of opposition to developers which comes from “well-educated people…whose livelihoods depend…on a robust economy.” By implication, Mr. Seymour seems to be saying that developers need to be freed from the constraints of financial accountability to taxpayers in order to have a robust economy.

Ironically, the recent spate of open and relatively uncontrolled development has already accomplished what Mr. Seymour fears. Developers have focused on high end housing (quite naturally, given the market), and high end out-of-town buyers and speculators are buying those houses and generally driving up prices to the point where many locals can no longer afford to live here, people are looking to the areas surrounding Kelowna because they are less expensive, infrastructure costs are increasing -- in short, the current situation is already making housing unaffordable and driving up taxes.

The studies show that residential development rarely pays for itself. Indeed, some of the studies show that, for every tax dollar received from residential development, $1.50 to $1.80 is required to service that development. In other words, existing residents subsidize the development through taxation, and “expanding the tax base” has the opposite of the desired effect.

As well, numerous examples from around the world show that having a robust economy has no direct link to new residential development. Many European countries and communities for example have virtually no population growth, but have very robust economies. The idea that we need population growth in order for our economy to grow and thrive is a complete fallacy.

One of the common arguments is that residential growth creates jobs, and that is certainly true. But, at the same time, those jobs then attract more people in from outside the community, creates more competition for locals who need the jobs, and in general cost us more money for the reasons mentioned above.

If growth creates so many jobs, has such beneficial spin-off effects on our economy, helps keep taxes down, and generally solves all of our problems; then by now Kelowna should have zero unemployment, zero homeless, affordable housing for all, low taxes, high wages for everyone, and a chicken in every pot. Yet 30,000 people use the food bank, and 20,000 people are one paycheck away from being homeless.

Even more of the same uncontrolled development and growth will simply lead to even more of the same problems. It’s time for some new ideas, some new ways of thinking, and some new ways of doing things.

Developer may not be “a four-letter word,” as Mr. Seymour states, but as it currently seems in Kelowna, it also does not connote progress, improvement, or creation of a better place for all to live.