Costs of Development Affect Communities’ Economic Futures: A Look at Metro Vancouver’s Development Charges

Vancouver-1-1

By Melanie Reuter

The Commercial Real Estate Development Association of Metro Vancouver released its annual Cost of Business Survey that examines municipalities’ cost of development and processing times.

Each city was given a case study and asked to analyze the application based on their development fees and procedures. This year`s case study was based on an office development – the construction of a 2-storey, 50,000 square foot Class B office building on 2.5 acres of land. It required rezoning, subdivision, development permit and building permit approvals. The building costs were listed at $132 per square foot, for a total of $6.6 million.

The study then ranked the municipalities on costs and time to process. High municipal property taxes for these types of businesses have serious impacts on our city, neighbourhoods and employment opportunities for residents. Although it is often said that businesses “don’t vote” in local elections, in reality they do cast a ballot, by making the decision to relocate to lower cost jurisdictions in which their business can thrive and contribute to the sustainability and vitality of their local communities.

Chilliwack was the only city to appear at, or near the top, for municipal fees, timing and property tax (mill) rates. Chilliwack and Surrey were the quickest at issuing building permits, while Chilliwack was also listed as the municipality with the lowest tax (mill) rates, at a 2.02 commercial-to-residential ratio.

Principles in the study said that what is important for developers is certainty, as this helps solidify costs to the end user and profit for the developer. In some cases, municipalities are “losing out to other municipalities, so they need to do something to either make it easier to develop in terms of the process for the application review, or [find a way] to decrease costs somewhere,” said Pacific Land Group’s Christopher Correia.

This is absolutely true. It cannot be stressed enough how important ease of development is for economic growth. The future, the funding, the experiences within the city are in part due to the income generated from the taxes from the businesses that choose to locate here. By attracting businesses that create jobs for the community a city creates more income for its residents through retail spending, sales tax, and income taxes. People will only live in places where there are jobs. We need to accommodate attractive jobs and attractive homes for employees to live in.

Processing Times

The speed of development directly impacts the bottom line of a project. Delays often translate into higher costs for the end user as capital is tied up, trades and schedules are delayed, and changing whether results in different approaches to accomplish a build. Consider the 300 day variance in application processing between the top and bottom cities on the list: The City of North Vancouver (last on the list) took 390 days to process the same application as the Cities of Surrey and Chilliwack (tied at number one on the list), which took 90 days. Consider the financial blow this has on developers.

Municipal Fees

White Rock reported the lowest fees, including development cost levies, building permit and application fees and rezoning application fees with a total of $140,643. Maple Ridge was fifth at $228,406 and Chilliwack ranked sixth in municipal fees, reporting a total cost of $261,982. Surrey’s fees were $509,990; Abbotsford’s were $536,693; and last and most expensive on the list was the Vancouver at $801,860 in fees on a $6.6 million development.

Tax Burden

A primary source of income for cities are the residential and business property taxes, which fund roads, emergency services and parks and utilities. Property tax is based on the value of the property being taxed and the rate at which it is taxed (mill rate).

NAIOP says the ideal median commercial-to-residential tax ratio as three-to-one.

Metro Vancouver Mill Rates per Municipality, 2014

2012
Rank
2014
Rank
Municipality Commercial
Mill Rate
Residential
Mill Rate
Commercial to
Residential Tax Ratio
1 1 City of Chilliwack 10.45 5.18 2.02
2 2 City of Langley 8.88 3.89 2.29
5 3 District of West Vancouver 4.25 1.77 2.39
4 4 City of Abbotsford 12.69 5.17 2.45
3 5 City of White Rock 8.93 3.58 2.49
9 6 City of Surrey 7.02 2.47 2.84
6 7 District of Maple Ridge 12.73 4.46 2.85
8 8 City of Port Moody 10.19 3.52 2.89
7 9 Township of Langley 9.60 3.23 2.97
12 10 Municipality of Delta 10.58 3.47 3.04
11 11 City of Pitt Meadows 12.48 4.01 3.11
15 12 City of Richmond 7.29 2.25 3.24
13 13 City of Port Coquitlam 12.94 3.88 3.33
17 14 City of North Vancouver 8.18 2.38 3.43
14 15 District of North Vancouver 8.48 2.44 3.47
10 16 District of Mission 16.43 4.68 3.51
16 17 City of New Westminster 13.23 3.75 3.52
19 18 City of Burnaby 9.36 2.34 3.99
18 19 City of Vancouver 7.88 1.85 4.27
20 20 City of Coquitlam 13.81 3.20 4.31

For the full report see: http://www.naiopvcr.com/media/37791/naiop_cobs_2014.pdf.

Melanie Reuter is the Director of Research with REIN and a Real Estate Investor owning both single and multi-family units in BC and Alberta. She has a Master of Arts Degree from California State University, San Bernardino and a BA from Simon Fraser University in Burnaby, BC.

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