BACKGROUND

Throughout 2019, we worked with members of the Development Industry and community through the Established Area Growth and Change Strategy (EAGCS) Utility Working Group. They explored opportunities to develop sustainable utility planning and funding tools, while meeting the Municipal Development Plan targets.

When subdivisions or communities are originally designed, the smaller, local water and sanitary pipe networks are sized based on the land use at the time. Communities in the Established Area were designed to a lower density land use, when compared to today, and the associated local sized water and sanitary pipes were sized accordingly. The existing local water and sanitary networks within the Established Area have adequate capacity to support the existing built form and customer usage. However, as redevelopment occurs and land use amendments enable greater development capacity, the capacity needed in these pipes increases.

The source of investment funding for upgrades to water and sanitary infrastructure depends on the size categorization. Currently, the utility rate funds the proportion of capital sized extensions or upgrades for linear water or sanitary pipes required to support growth in the Established Area. The average amount of investment for this infrastructure is approximately $10-15 million per year. In contrast, this type of infrastructure in greenfield communities is funded through the Off-site Levy.

PROBLEM TO SOLVE

The EAGCS Utility Working Group identified a first-in issue in the Established Area. It occurs when a new proposed development or redevelopment triggers the need for additional capacity in the local water or sanitary network that necessitates an infrastructure upgrade. Currently, the developer is required to fund the entire upgrade to support their proposed development. This first-in issue has two known challenges:

1. Uncertainty – The trigger and scope of local sized pipe upgrades is site specific and dependent on the built form of the proposed development and the available capacity in the existing systems. In some cases, confirmation of a triggered upgrade is not verified until a development application is submitted and through the review the extent of the upgrade is clarified, which is often after the land purchase. These unexpected costs identified late in the planning process result in financial uncertainty for developers. Depending on the order of magnitude for the upgrade, it can result in the abandonment of a project due to lack of financial viability.
2. Fairness and Equity - The local pipe upgrades are triggered by and necessary to serve the proposed redevelopment and so they are a developer obligation. However, it is possible that further development in the area may benefit from this upgrade without future developers having to contribute to the costs paid for by the first developer. Currently there is no mechanism for development to recover any of these costs from future developers in the Established Area.

The Utility Working Group identified a levy tool as a potential mechanism to address the two key challenges related to the first-in local sized water and sanitary pipe upgrades issue.

On April 29, 2020, Council directed Administration to:

Explore a new Established Area off-site levy for local-sized water and sanitary pipes, through consultation with stakeholders, and for Council’s consideration, as part of the current Off-site Levy Bylaw review.

IMPORTANT DEFINITIONS

Public water and sanitary infrastructure is categorized by The City into two size categories which relates to the servicing functions the infrastructure performs, and the population serviced:

• Capital sized infrastructure (500mm or larger water pipes, 600mm or larger wastewater pipes) are the larger water feedermains that supply the water distribution system and sanitary trunks that collect from the sanitary transmission system. They do not typically have any direct customer service connections.
• Local sized infrastructure (less than 500mm water pipes, less than 600mm wastewater pipes) are the smaller water and sanitary pipes that are directly connected to customers.

There are two types of local sized upgrades that may be triggered by development:

• Upgrades refer to an increase in capacity through an increase in pipe size. Pipes are replaced with larger sized pipes.
• Extensions refer to new pipe installations in areas that currently do not have any pipes to extend the existing local sized network. Extensions are often required to strengthen the water network “grid” to be able to provide an increase in available fire flow.

The Established Area is quite large, and there is high variability in where redevelopment occurs. Over the past ten years, Calgary’s growth pattern has seen approximately 90% of new population growth go to the Greenfield areas and 10% to the Established Areas, while the long-term target, as identified in the Municipal Development Plan (MDP), is that 50% of new residents would be located in the Greenfield Areas and 50% would be located in the Established Area.

Based on our learnings to date, to adequately address the first-in issue and advance towards the targets, a levy is being proposed as the appropriate tool. The City has identified the need for both a proactive and reactive investment program. This two-pronged approach supports the outcome of achieving the overall goal of the MDP by driving strategic investment into priority areas, while also supporting development in the broader Established Area.

PROACTIVE INVESTMENT PROGRAM

The proactive investment program is targeted at strategic infrastructure upgrades in priority Established Area communities that are likely to be triggered at some point in the future by development. The program will support a broad level of development in the community (i.e. not just one lot) and align with other infrastructure projects where possible (e.g. Main Street or other public infrastructure projects). This investment program will be developed in alignment with the Established Area Growth and Change Strategy and be supported by the infrastructure analyses being completed for Local Area Plans (LAPs) that are underway.

Over time, this proactive investment program will help attract more development within the Established Area by making it easier to develop and will minimize repeated disruptions to the community.

To support this, The City will establish an annual investment program ranging between $1-4M per year for proactive local investment that is funded through utility rates. This annual program will proactively and strategically invest in upgrades that support priority Established Area communities, to alleviate growth-related capacity pressure and incentivize short term growth. Investments will preferably be aligned with other public infrastructure or public realm projects to minimize disruption to the community and increase infrastructure delivery efficiency.

This initial investment level will be updated where possible when more information is available, and projects will be prioritized within available capital budget funding. As proactive upgrades are completed, there will be a direct impact (in the form of reduction) over time to the number of reactive upgrades triggered.

REACTIVE INVESTMENT PROGRAM

The reactive investment program will enable cost sharing between developers for infrastructure upgrades triggered by a development application in a defined area. This program will build off the success experienced through the Centre City Levy and will provide more certainty to developers working within the Established Area.

Based on the historical review of triggered upgrades, these reactive infrastructure upgrades triggered by development, typically have a negligible benefit to existing customers given the age or condition of the existing infrastructure and that the existing capacity is sufficient for the current local-sized infrastructure use.

To support this program, a dedicated reactive fund of approximately $1M per year will be established and will be used to share the costs of infrastructure capacity upgrades triggered by development applications. All developments within the Established Area will pay into the levy through a per unit or square footage charge, and any developments that trigger an eligible upgrade will qualify for reimbursement from the fund. The per unit and square footage charges for this levy will be calculated based on the collections required to meet the target using historical empirical data.

In the interest of achieving MDP targets to support strategic growth and encourage redevelopment, we recognize that it will be beneficial to the Development Industry for The City to subsidize this fund. We propose an annual subsidy of 50% or $500,000 per year to reduce the developer contribution total target amount to $500,000/year. The proposed subsidy can be revisited by Council in the future. However, it is our intention to propose that the subsidy remain for the foreseeable future, to encourage redevelopment as per the MDP goal.

For more detailed information about the Proactive and Reactive Investment Programs, please read the detailed proposal and example scenarios for the new Established Area Local-sized Linear Levy.

Thank you for your feedback. Online engagement for this phase of the Established Area Local-sized Linear Levy is now closed. Please check back to this page for a What We Heard report of the feedback we received.