What you need to know about Community Benefits Charges (CBC)

November 2, 2020

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Bill 197 introduces regulation 509/20 under the Planning Act to implement Community Benefits Charges (CBCs), making substantive changes to Section 37 of the Planning Act. As of September 18, 2020, this regulation is now in force  subject to transition provisions.

What is a CBC?

A CBC is a financial contribution that is required to be paid when land is developed to contribute to the “capital costs of facilities, services and matters” incurred from development and population growth. The imposition of a CBC by-law is limited to lower and single tier municipalities.

When do CBCs come into effect?

The existing Section 37 provisions regarding height and density bonusing remain in effect until a municipality passes a CBC By-law or until September 18, 2022. Further, unless it is repealed, any Site or Area-Specific Zoning By-law that describes required Section 37 contributions, that is enacted before the end of the transition period continues to apply after the CBC By-law is enacted, and the subject lands are not subject to CBCs.

While shifting to a new Community Benefit Charge will be a change for developers, municipal planners, lawyers and Councillors, the 4% value cap, along with the limitations for its application, may provide clarity to applicants as to what can be built and what will have to be paid to support that development.

Where can CBCs be applied?

A CBC payment is now required for most planning applications, including a Zoning By-law Amendment, Plan of Subdivision, Minor Variance, Plan of Condominium, Building Permit, Consent and Land Conveyance. Unlike Section 37, they are no longer restricted to zoning and minor variance applications proposing height and/or density beyond the as-of-right planning permissions.

However, some types of developments are exempt. CBCs may not be imposed for development or redevelopment with fewer than five storeys, development or redevelopment that adds fewer than 10 residential units. As a result, CBCs will not be charged for non-residential development, including major office towers, nor for smaller-scale residential development with less than 10 units or below five storeys, as well as other development types listed below. For the City of Toronto, this represents a substantial shift from recent practices that have secured large Section 37 contributions for commercial office towers. CBCs also cannot be imposed on developments for long-term care homes, retirement homes and hospices, post-secondary institutions, memorial homes, athletic grounds or non-profit housing. These exemptions reflect provincial priorities for these types of development.

How will CBCs be calculated?

Community Benefits Charges will be capped at 4% of land value. There does not appear to be a change in when the CBC charge is payable, which is typically prior to the issuing of an above-grade building permit unless otherwise negotiated with the municipality. The valuation will be based on the value of the land calculated the day before building permits are issued. In cases where there is a dispute over the value of land, additional land appraisals can be conducted in order to reach a resolution between the landowner and the municipality. The introduction of a cap of 4% represents a significant shift towards predictability for landowners and developers who will now be able to estimate, at the onset of a project, what the maximum CBC costs of development might be.

How will municipalities implement Community Benefits Charges?

Should they elect to use CBCs, municipalities have until September 18, 2022 to pass a CBC By-law under Section 37(2) of the Planning Act and transition away from the previous Section 37 regime. Should municipalities choose not to use CBCs, they will be able to rely on development charges (DCs) and parkland dedication in order to support new development. Before enacting a CBC By-law, municipalities must prepare a “Community Benefit Charge Strategy” that identifies how they will use the collected funds. The CBC Strategy will detail the anticipated type of development for which CBCs will be charged as well as the increased need for the additional services they will fund. The CBC Strategy must outline the costs and benefits of the additional services, and also identify any capital grants, subsidies or contributions available with respect to their capital costs.

The CBC By-law is appealable to the LPAT. On appeal, the LPAT may either dismiss the appeal, repeal or amend the by-law, or order that the council of the municipality repeal or amend the by-law. The CBC By-law continues to apply while the appeals are resolved at the LPAT.

Each year, municipalities will be required to prepare a report detailing the status of the CBC account, including the funds collected, how they were used throughout the year and what assets were acquired.

How can CBCs be used?

The funds collected as CBCs can be used towards a number of services, facilities and matters identified by the municipality through their CBC Strategy. The new regulations allow municipalities to use CBCs and DCs interchangeably to fund an eligible service, provided that the capital costs that are to be funded by CBCs are not also funded by DCs (or under the parkland dedication). This is designed to prevent ‘double-dipping’ for the capital costs of services. At the discretion of the municipality, in-kind contributions are permitted in exchange for a reduction in the value of a CBC.

What happened to parkland…and ‘soft’ development charges?

Planning Act requirements for parkland dedication and soft development charges (i.e. parks and recreation facilities) were proposed to be included in the CBC charge under Bill 108 and Bill 138. This proposed change was not implemented, and both remain the largely unchanged. However, municipalities must adapt to a shift in parkland dedication policy. Those municipalities that do not have alternative parkland dedication requirements mentioned in their Official Plan must update those policies prior to implementing the new alternative rate. These alternative parkland dedication by-law amendments can be appealed to the LPAT.

The Province has indicated that CBCs will work in conjunction with DCs and parkland dedication to give municipalities a broad suite of tools to cover the costs of services that are needed as a result of development. Every municipality will treat the relationship between CBCs, parkland dedication, and DCs differently, and the next year will be telling as municipalities work on their Community Benefits Charge Strategy, and consult with the public on the Strategy.

The decision to submit a planning application before or after the enactment of a CBC By-law should be made carefully. Submitting an application before the CBC By-law is enacted means moving through a known process, but the costs of a Section 37 process may be unpredictable. Submitting a planning application after a CBC By-law is enacted gives more certainty with the 4% land value cap, but may result in a delay in applicability. These decisions should be weighed carefully, and may benefit from professional planning advice.

Stay tuned for more policy blog posts over the coming days!

Urban Strategies has a strong understanding of planning policy and the planning approvals process.  We would be pleased to explore any questions about land use planning and what these policy changes mean for you. Please get in touch with Ben Hoff with any inquiries.

Authored by: Georgia Luyt and Inger Squires