A local developer says his company's expectations weren't met by the city's 2024 off-site levy rates, which council unanimously approved on March 19.
“We are seeing progress in some of the levies decreasing,” said Mike Yochim, vice-president of operations for Landrex. “Did it go down to what our expectations were? No.”
“This is a very complicated calculation that is not black and white, so it's hard to understand what our expectation is because it's not a black-and-white expectation,” Yochim said.
Off-site levies are a method of funding infrastructure development when a municipality can't pay the full cost. Locally, the off-site levy program involves a development company such as Landrex — or the city itself — putting up ("front-ending") construction costs, with a guarantee other developers who benefit from the infrastructure construction will pay city-determined levies in the future, which are then used to pay back the entity that front-ended construction costs.
To calculate levies, which St. Albert splits into four separate fees for four different types of infrastructure, the city calculates the amount of money expected to be needed for a list of major infrastructure projects planned over the next 25 years, and adds those costs to a flat rate amount. It then factors in inflation, when the projects are actually expected to be constructed, interest rates, and when levies are expected to be collected.
Once those calculations are complete, the per-hectare levies are adjusted for specific parcels of future development land.
After the city calculates the total funds collected from levies each year, the city and developers are reimbursed portions of the money they previously committed. Last week council approved the 2023 reimbursement totals, for which the city is being reimbursed close to $4.54 million, and slightly more than $400,000 is being split between four different developers.
The city is still owed nearly $56.5 million for front-ending construction costs of past projects.
Unlike last year, when the off-site levy for road construction increased by nearly 50 per cent per hectare, the 2024 rates approved by council on March 19 include decreases for road and water projects, and increases for sanitary (sewage) and stormwater projects. In total, many land parcels are seeing decreased off-site levy rates ranging from a $2,000 per hectare reduction to about a $26,000 decrease.
Not all land parcels are having decreased rates applied, though, as quite a few parcels are increasing by $15,000 to $30,000 per hectare.
A report to council written by Tanya Hynes, the city's off-site levy specialist, said the reduced rate for road projects is in part because of decreased project cost estimates, and because future phases of the St. Albert Trail reconstruction and rehabilitation project have been split into additional phases. That means since some of the expected costs won't be realized until further into the future than previously thought, the city doesn't need to start collecting as much money now.
Likewise, Hynes wrote the water levy rate was decreased because two future water main projects were pushed back a year.
The sewage levy rate, which for many parcels of land is increasing between $25,000 to about $40,000 per hectare, is a result of the city identifying three new sewage projects that will eventually be needed if development continues in the north as expected over the next two decades.
“The addition of three new projects influenced the increase in sanitary off-site levy rates seen in some benefiting [land parcels],” Hynes wrote.
“As a utility master plan is completed for the lands within the latest annexed area, it is anticipated that additional sanitary projects may be added to the off-site levy model.”
Hynes wrote that the stormwater specific levy rate, which is increasing by $13,000 per hectare for most land parcels, is increasing due to updated project cost estimates for a single stormwater and trunk sewer and outfall project.
During the March 19 council meeting, Mayor Cathy Heron said off-site levies are “the most confusing thing that council ever has to deal with.”
“I've listened to [this] presentation for a number of years, and I'm always somewhat amazed because it seems like black magic to me,” Coun. Wes Brodhead said, adding later he meant no disrespect to Hynes by using the term "black magic," but “there's a lot that goes into calculating these, and the complexity is certainly beyond me.”
On the right path
Yochim said although Landrex's expectations weren't met, he thinks the city is on the right path.
“Hopefully, next year we're going to start seeing even more decreases, and I don't think we're expecting to see huge movements because it just doesn't work that way,” he said. “The city's doing the right thing, but we're going to kind of chip away at it year after year so that we can get it fine-tuned.”
For Landrex, which Yochim said didn't start any new development projects in 2023, this construction season will be a test of the new levy rates.
“There wasn't too much development last year, which was actually not too bad, because the rates increased quite a bit last year and then now they've kind of, not balanced, but we kind of brought them down a little bit to a number that is getting lower than it was before, so it's helpful for us.”
Sue Keating, the vice-president of community development in Edmonton for Melcor, another development company with projects on the go in St. Albert, said in an email that the company is still evaluating development plans for the 2024 construction season. She said it's not clear how the new off-site levy rates will affect the company.
“Items such as offsite levies and serviceability of our land are some of the key issues we assess,” Keating said. “While this decision has now been made, we believe it is critical that council and administration engage with industry on its implementation and the ongoing management and evaluation of off-site levy projects.”
“The industry can help to provide important expertise on real estate development, market dynamics, and land-use economics — so that any solution advanced does not inadvertently impact our collective efforts to create diverse communities and homes for people in St. Albert.”
