The Mayor of Calgary, Naheed Nenshi said it best when he noted that developers and not taxpayers need to foot the bill for city services in new communities.
However, those costs incurred by the developers and ultimately, new home builders may ultimately pass the bill along to buyers of those new homes in Calgary’s outer suburbs.
A five-year deal
This month, City of Calgary councils approved a five-year agreement in which developers will start paying for all water and waste-water infrastructure in new communities beginning in 2018.
The City of Calgary took on debt trying to provide new residential services between 2000 and 2011, a period of expansive suburban growth. The City has to increase monthly water bills to mitigate the rising debit load.
Beginning in 2011, developers were required to pay half of the cost of new infrastructure while the City agreed to pay the other 50%.
The off-site levy will be phased in. This year, developers will foot one third of the bill, two thirds in 2017 and the full ride beginning in 2018.
What this means for home prices
Under this new plan, the City of Calgary believes that if developers and new home builders pass the extra costs along to the end user, the buyer, it will add at the very most 1% to the purchase price. That’s $5,000 on a half million dollar home.
However, it will significantly reduce the amount of money the City of Calgary spends on building residential services infrastructure which in turn will keep utility bills in check and tax bills stable.
Keeping costs down
There are a few things developers can do to mitigate the extra expense of putting in water and sewer lines in new communities. If they create density in these communities, they would spread the added cost amount more residential units. Conversely, the City of Calgary has made a commitment to the community to continue the daunting task of cutting through historic red tape so that the approval process is more streamlined. Removing some of the red tape will reduce the cost to the developer at the beginning stages of a new community.
A report submitted during this by-law approval process states that the cost to the City of providing water and waste-water infrastructure is between $206,000 and $249,000 per hectare. This is in Greenfield developments, which means land which has never been used in any way and has no prior buildings or services. Typically farm or grazing land surrounding the City of Calgary.
The report also claims that when new roads and other services such as lights, EMS and fire are added the cost per hectare can rise to nearly $465,000. The Mayor has said that between 2000 and 2011 the City racked up a $1.1 billion debt just for water and sewer in new areas.
The new rates will come into effect on February 1 and apply to all new development permit applications, both in Greenfield developments and in established communities in Calgary.
The exact levy will be established at the time of approval. Before this new agreement was approved this month, the levy was assessed and paid at the time the development permit was issued. If the permit is for redevelopment of an existing site, a credit will be issued depending on the condition and require revisions of the services already in place.