St. Catharines considering more taxpayer-funded incentives for developers despite questions about their effectiveness
A series of development proposals on St. Catharines City Council’s agenda for Monday follows a trend across Niagara Region that has raised concern over the effectiveness of funding projects designed to ignite growth on vacant lands previously zoned for industry or other abandoned uses.
Monday’s report to council recommends the approval of tax incentive applications for development proposals at 16 Lock Street, 235 Merritt Street and 180 Queenston Street, as part of the City’s 2020 Community Improvement Plan (CIP).
It's not unknown that the taxpayers of Niagara Region and its 12 municipalities hand out millions of dollars in incentives and grants to developers and small businesses through programs like CIP’s to incentivize growth. However, a number of controversial decisions by local councils in recent years have seen these programs hand over millions to wealthy developers building multi-million-dollar luxury condos — amid an affordable housing crisis plaguing the province, and Niagara residents are not immune.
The Pointer has previously reported on the doubts that have been raised about the effectiveness of CIPs as economic growth generators.
Community Improvement Plans are a tool created by the Province under the Planning Act that allows municipalities across Ontario to create funding programs for any “environmental, social or community economic development reason.” These programs vary across Niagara, but often come in the form of grants over several years after a development is complete.
But reports from area municipalities have called into question the effectiveness of these programs.
However, Monday’s staff report notes CIPs “are one of the most effective tools available to municipal governments to directly incentivize redevelopment, accelerate the creation of housing units, and support growth in strategic areas, including brownfield sites and growth centres.”
The report recommends that council approve a Brownfield Tax Increment Finance (BTIF) incentive — a financing tool from the Government of Ontario that helps municipalities give tax assistance to clean up brownfield properties — equal to an 80 percent annual tax rebate over a 10-year period for 16 Lock Street and 235 Merritt Street. It also recommends council approve a Tax Increment Finance (TIF) incentive, equal to a 65 percent annual tax rebate over a 10-year period, for 180 Queenston Street.
The development proposal for 16 Lock Street, before and after.
(City of St. Catharines)
Staff are recommending approval of all three applications based on the justification that they meet “the eligibility requirements and achieves the minimum 50-point threshold in accordance with the policies of the 2020 CIP. The proposed redevelopment projects align with and help implement community renewal objectives, goals, and strategies established in the City’s Corporate Strategic Plan, the Official Plan, as well as other related municipal planning initiatives.”
The brownfield tax program and the TIF program are the two most substantial incentives provided in the 2020 CIP, according to Monday’s staff report. Both are meant for larger scale, longer term projects where the incentive is provided for up to 10 years after project completion.
Previous reporting from The Pointer noted regional staff showed the incentives do work in rehabilitating lands that the market would not otherwise take on due to risk. This is a mechanism that should be used as a temporary tool once market momentum catches up, yet these incentives continue in a market that no longer requires them.
Despite these financial handouts raising questions about the effectiveness of incentive programs meant to direct taxpayer dollars to communities in need, Monday’s report shows just how frequently these incentive programs continue to be utilized.
The proposed development application at 16 Lock Street includes remediating the lands to develop six new mixed-use buildings, with a total of 155 dwelling units and eight commercial units which the report says will accommodate an estimated 248 residents and 32 new jobs in the Port Dalhousie core, in addition to the restoration of two heritage structures. The incentive is requesting $350,867 annually for a total value of $3,508,672 over 10 years.
The application for 235 Merritt Street includes the redevelopment of the lands for one commercial building and two mixed-use buildings, consisting of 116 total dwelling units and nine commercial units, accommodating an estimated 185 residents and 43 new jobs located in the Hartzel Road/Merritton Priority Neighbourhood. The proposal also includes 24 affordable rental dwelling units (20 percent), subject to a Core Rental Housing Agreement with the City. The incentive requests $227,991 annually for a total value of $2,279,913 over 10 years.
The before and after for the development proposal at 235 Merritt Street.
(City of St. Catharines)
The proposal for 180 Queenston Street includes a single development containing 39 rental units, accommodating an estimated 62 residents located in the Queenston Priority Neighbourhood. Of the proposed units, 13 are to be provided as affordable rental dwelling units (33 percent), subject to a Core Rental Housing Agreement with the City. The TIF municipal incentive is requesting $31,303 annually for a total value of $313,034 over 10 years.
All of this funding is then matched by Niagara Region through the 12 municipalities that provide the tax dollars, including 11 that won’t have the opportunity to reap the benefits.
“The proposed projects contribute to the City’s community revitalization objectives, goals, and growth management strategies while providing a net financial benefit,” the report notes, adding, “The requested tax incentives will facilitate significant investment in priority and intensification neighbourhoods and long-term increases in property tax assessment.”
Residents have raised concerns about their role in subsidizing wealthy developers and their proposals in other parts of Niagara’s municipalities, while seeing few benefits in return.
Considering the province’s affordability crisis and the dire need for more affordable housing, according to the Project Evaluation System, the development proposals at 235 Merritt Street and 180 Queenston Street check the boxes for affordable housing, while the application at 15 Lock Street does not include any mention for affordable housing. However, according to the evaluation system, the redevelopment project at 16 Lock Street meets the criteria under the CIP as it “will have significant costs related to environmental remediation, large scale of investment, mixed-use built form, heritage restoration, value added sustainable site design, and density generation of 591 people and jobs per hectare.”
The development proposal for 180 Queenston Street, before and after.
(City of St. Catharines)
While this funding mechanism has been used by municipalities across the province for decades, there is little research to determine whether they actually work, or if they are merely just hand-outs to developers making even bigger profits at the expense of taxpayers.
In 2019, standing before regional councillors, KPMG representative Oscar Poloni revealed that, in addition to finding no proven impact on the success of incentive programs like CIP’s, there was “inconsistent and insufficient” monitoring to ensure applicants are following through on their commitments. He also told councillors the amount they have been approving in incentives is high compared to other Ontario cities. Contrasting their intended impact as a revenue saving tool, the KPMG report noted CIPs in their current form are “forecasted to create financial pressures in the coming years.”
With no comprehensive measurement tool that sets out criteria to determine the effectiveness of these programs, another challenge with assessing their value is how “success” is defined, which can be subjective. A 2020 report to St. Catharines council noted, “There is no reliable evaluation tool available to the City to assess whether the project could or would proceed without incentives.”
Earlier this year St. Catharines council approved two more development proposals under its CIP incentive program, one at 10 Pleasant Avenue for a private road development containing a 9-storey apartment building with 351 dwelling units, 14 townhouse dwelling units, and another at 88 James Street for a mixed-use, 30 storey tower consisting of 276 dwelling units. Neither development met the City’s core housing criteria to provide affordable housing.
Other luxurious development projects in the municipality have included the Harbour Club, a Port Dalhousie condo project that plans to bring “exclusive” lofts and “estate residences” to the St. Catharines waterfront with 120 units and a 9-storey addition. The lavish development will receive approximately $7.12 million over the next 10 years to assist with environmental remediation on the site.
After City Council denied the project for funding twice, staff reconfigured the CIP program with the addition of a “scoring” system that gives points to proposed developments. There are no criteria around who can apply for these incentives, leaving the opportunity for large companies and their development consortiums to charge through and make profits off the limited taxpayer funding municipalities receive.
All of this comes as St. Catharines property taxpayers ended up with a 10.51 percent increase over 2022 — a historic rise for the municipality — after City Council, in a controversial move, spent $13.5 million it saved by uploading St. Catharines Transit to Niagara Region, flouting the warnings from city taxpayers would be footing the transit bill. As the Region’s budget came in with a 7.58 percent general levy increase in addition to the new transit levy, St. Catharines property taxpayers were left with the daunting 10.51 percent increase.
In July, a motion was brought forward to reconsider a portion of the City’s 2023 budget that deals with staff positions, calling for council to freeze hirings and give any savings back to taxpayers. In a divided climax, council voted 7-6 not to reopen the debate or allow residents to have their say ahead of the vote.
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