Grey County is concerned that the development charges funding well may run dry in the next few years.
At county council’s meeting on August 11, Deputy CAO Randy Scherzer delivered a report outlining county staff’s concerns that development charges (DC) problems may be on the horizon.
Scherzer said the county is facing a double whammy on the DC front. First, with the rate of inflation running high the county is seeing significant increases in the costs of capital projects and those increases are not reflected in the estimated costs of DC eligible projects in the county’s DC study, which was completed in 2021 prior to increases in the rate of inflation. Secondly, if the rate of inflation causes the economy to slow, the county may find itself collecting less DC revenue than expected.
“We could see a lower rate of growth compared to what we’ve been seeing over the past several years,” said Scherzer. “It could result in DC reserves going into a negative position in the next five years,” he said.
The county has seen 10-30 per cent increases in construction costs due to the rising costs of labour, fuel and materials. The county’s development charges reserves are facing pressure as significant withdrawals will be made in the near future for the Rockwood Terrace long-term care project in Durham and affordable housing builds on the horizon. Long-term care and affordable housing only became DC eligible in 2021 and the county does not have a significant DC reserves on hand for those projects.
Scherzer said there are four options for council to consider to manage the problem.
- Defer capital projects.
- Open up the DC bylaw and update the DC background study to reflect the emerging financial reality.
- Put DC reserves into a negative position or debt-finance DC-eligible projects.
- Monitor capital costs against DC reserves and DC revenue on a quarterly basis with any significant shifts to be reported to council immediately.
County staff recommended option four be the course of action for the time being.
“Staff will also continue to monitor the growth that is occurring compared to the projected growth rates to ensure that the timing of the growth-related capital projects is appropriate,” Scherzer said in his report.
County council approved the recommendation from staff. Southgate Deputy Mayor Brian Milne noted that a recent report on the American economy indicated that inflation in the US had “plateaued” and “dropped off” in recent months.
“We should be okay with monitoring and proceeding as planned,” said Milne. “We hope the inflation rate is starting to come down.”