Analysis: Both Sides Blindsided?
By John Swartz
The matter of Building Hope’s development charges (DCs) and waiver of security was back before Orillia council this week. The project team asked for forgiveness of the developments charges, approximately $408,000 (an exact figure won’t be known until the construction contract is determined,
estimated at $14 million ), and a security deposit of approximately $633,000 be waived.
Things threatened to go off the rails based on staff’s report to council of what doing those concessions mean to City finances. There was information from the Canadian Mortgage and Housing Corporation (CMHC) that didn’t sit well with one councillor.
We’ll return to that, but it might be helpful to outline exactly what the requests are about. Every development project must by provincial law pay development charges to the municipality based on the value of the project. The charges are meant to cover increased costs for municipal services caused by development.
For example, say someone builds an industrial building, or a subdivision and 250 people will be added to the population of Orillia as a result. Taking into account those people have families, that’s a lot of new demand on services. There will be more demand on police, fire, ambulance and medical services. The parks and rec facilities get used more, as do libraries. Roads wear out sooner, water treatment, in both directions, gets used more. Municipalities are allowed to use development charges to pay for those extra costs (expansion of current facilities or for new) and not put it on the tax levy for all residents to pay . In reality, most of the time DC funds make up part of capital costs for most projects like reconstructing Front Street, building a new library, fire halls, etc. In the theory replacement for wear and tear is on all of us, expansion is on the new folks.
Security deposits are like construction or performance bonds. They are guarantees a developer will build to community standards and when things aren’t, the City can make a developer correct, or do it themselves, and there’s money to cover the cost. A group like Building Hope doesn’t necessarily have to put up cash, letters of credit work. If there are no deficiencies to correct, cash securities are returned, letters of credit get shredded. In other words, tax payers are not on the hook, unless of course there is no security arranged, or corrections have a higher value than the security, in which case the municipality will try to recover from the developer.
“If they default on any one of those things the City’s first step is to achieve compliance. If we are outside of the agreement at that point, if they will not, or cannot, do them the only way to ensure compliance is through litigation by way of charges under the Planning Act,” Ian Sugden, Orillia’s director of development services, told council this week. He also said going to court may be involve fines .
It would be another thing if charitable groups like Building Hope ventured anywhere near this kind of action. Having to tie up so much money has an effect on Building Hope’s cash flow they wish to avoid. The observed sentiment of a majority of council is this won’t be an issue.
So the only amount really in question are the DCs. They have to be paid by somebody. If municipality wants to they can cover it, in this case possibly from the capital facilities reserve account (which is currently overdrawn by $13 million), or some other reserve. Theoretically anybody can pay it, so long as it’s paid.
What Happened
The reason Building Hope asked for relief from the DCs was made known at a deputation Apr.1. As project co-chair Glenn Wagner said:
“The two asks that we have before council, the first one is really one, in my understanding, that every level of government is really committed to when the project has to do with affordable housing, and that’s to encourage the forgiveness of development charges to ensure we have these type of facilities and can meet the needs of those that are most vulnerable in our community. That’s also part of a letter of intent that we have from the Canadian Mortgage and Housing Corporation, which is a letter of intent to grant us up to $6.33 million. This is one of the conditions set out in that letter of intent. So it behooves us, I hope, to ensure that we reap those immense amount of funds from the federal government through CMHC,” Wagner said.
That is the only statement Wagner made regarding DCs and that paragraph will be referenced several times below. A review of the entire deputation shows no councillor asked a question about that statement. Yet, it was to become a bone of contention this week.
Understanding how Wagner and Building Hope came to view the forgiveness of the DCs is instructive. In the application for a co-investment grant from CMHC, applicants have to provide some financial forecasts, construction costs, fundraising goals and costs, DCS and other things. Wagner said their first pass did not include a DC amount because they didn’t know what it would be, if Building Hope could get the DCs covered by the City, or if it was really necessary to include it. On advice from the CMHC applicant coach, he was told to include it and he said he contacted development services to determine a reasonable amount
“We were asked to put in a budget number. That’s all it was. We were asked to put in a group of budget numbers,” Wagner said.
Then CMHC included the DC amount forgiveness as a condition of the grant, which to people like Wagner, the Building Hope team, or anyone else not familiar with grant processes at any level of government, may sound like that’s a thing they must to do.
It might be understandable to anyone who doesn’t deal with this process on a regular basis the obvious thing to do is ask council, which they did at the deputation. As noted, no councillor inquired further about it at the time.
So far we have four parties involved in bilateral discussions – Building Hope and CMHC, Building Hope and council, and Building Hope and City administration. One can imagine how things can get muddled. This week the new dynamic is council with administration on the DC issue.
In all of this the real experts are administration. Their first instinct is to not put their approval behind any request to spend money not already approved in budget, which indeed is the first and recommend motion in their report. Their justification on the DC component is:
“… staff contacted the Canada Mortgage and Housing Corporation (CMHC) to obtain clarification on the issue of the City’s Development Charges and their relation to the CMHC loan. The CMHC advised that their organization does not require the City to waive (emphasis ours) (or grant an amount equal to) the City’s Development Charges. The CMHC further advised that the condition in their loan Letter of Intent to the proponent (Orillia Christian Centre) with respect to the City’s Development Charges was included in the conditions as a result of the proponent’s advising the CMHC (in their construction financing application in 2018) that $328,709 of the construction cost will be covered via a waiver of Development Charges by the City of Orillia.”
This is where language written and spoken matters. Bureaucrats speak to each other in a form of English which often sounds like gibberish to the rest of us (and to councillors based on the kinds of questions council often asks administration at public meetings). Some of the time, a bureaucrat will speak to commoners with different language to explain the same point, but in written form, a report, it usually isn’t the case; things have to be kept legal, using accepted jargon. Failing to realize this can lead people to wrong conclusions. Failing to ask for clarification can reinforce them.
“I think where that happened was, the condition was placed on the Building Hope initiative and our team. It was not placed on the City and there was never a comment from us to CHMC that would say those DCs would be forgiven for sure. That was never the case. Whether CMHC is saying that at this point, that’s clarification that has to be made by the City and CMHC,” Wagner said after council dealt with the report this past Monday.
The key difference of interpretation is how City staff portray and use the word ‘advising’ in their report, which is certainly correct from a bureaucratic viewpoint because putting an amount in a grant application is inherently advising, compared to the common meaning of the word. From Wagner’s point of view, CMHC asking Building Hope to plug in a number does not equate to advising CMHC the City is going to do something.
This is not how councillor Ted Emond sees it. On Monday night he went after the deputation Wagner made and the impression left on council, against the impression formed on reading the report.
“I take the word of our chief administrative officer and the report she brings to council,” Emond said after the meeting.
“The report from the chief administrative officer does indicate that the CMHC does not have a requirement for us to defer development charges in order to receive this loan. Somehow in the application and the communication it was implied to the CMHC the City had already agreed to the relief of these development charges. That had not come before council, so I find that little bit odd. I’m looking forward to, at some point, the leadership of Building Hope to explain the governance model that they are working that would allow that kind of manipulation of a federal program and imply that we as a council had already agreed to something,” Emond said during the meeting. Later in the same debate Emond said:
“We can all sit back and lament that we wished that individuals had been more forthright and upfront about what they were saying and asked us first, but nonetheless the decision to ensure we act in a manner that assures Building Hope that it can continue to draw on CMHC funding is a critical decision for our council, a critical decision for their project, and one I think we need to think very seriously about as we move forward.”
Councillor Lauer came to Wagner’s defense, outlining essentially what has already been said above.
“They are here, and they are asking us if we wish to participate as their partner. I don’t think somebody’s speaking out of turn,” said Lauer of the Building Hope pitch. “We have full rights to say yes or to say no.”
Mayor Steve Clarke offered his perspective on the difference of opinion regarding the request and how it was made.
“I think the disconnect is simply that last week when we heard the request, it was certainly my impression if we did not support that request it would potentially kill the project. That is a different set of circumstances under which to make a decision than it is if we don’t necessarily have that pressure,” said Clarke.
However, to an observer of both meetings, it’s unclear how what Wagner said, noted above, could leave any impression. Nothing was said regarding urgency or obligation on the City’s part. One can imagine a perception securing a grant of this magnitude is critical to the construction timeline with the few weeks in hand knowing Building Hope announced a construction start date at the end of May.
The Fallout
Council did vote to provide the assistance requested and the decision will be ratified this coming Monday, but Wagner took great exception to Emond’s statements.
“I think the mayor is correct in saying there was a disconnect, but I don’t like the terms used by some of council, – manipulation, or manipulated, and individuals not being forthright. I take personal exception to those comments and I think they are inappropriate frankly when they don’t have the whole story,” said Wagner after council moved on from the report.
“I’m very comfortable with their support of the project overall. I think that’s great and appreciated. But, at the same time there was never any attempt to misdirect, mislead at all,” Wagner said.
”One thing I do appreciate, City staff rushed this through. Timing is of essence here. They did a lot of work. They attempted to give a proper report to council, we appreciate that wholeheartedly. The problem is, in that urgency, I don’t think the full story was told and it made it look like we were trying to pull the wool over someone’s eye, which was never the case.”
Fundraising Concerns
Wagner was most concerned how things transpired may have sounded to the TV audience watching the proceedings in light of Building Hope recently launching a $3 million public fundraising campaign (counting the CMHC grant, they have $11 million lined up).
“It has ramifications when things like that are said. More so for the project,” Wagner said. “I think the councillor who made those comments supports the project, but having said that, it can still be damaging. Are they repairable? I don’t know. I think once the cat’s pout of the bag, it’s hard to get it back in.”
Following the council meeting, Emond was ask if his opinion changes after SUNonline/Orillia provided him with Wagner’s above remarks.
“We were given very clear indications from staff that what Glenn said last week was not absolutely correct and my belief is that if you want the City to support the project, you come to the City and ask for that support before you commit the City to be a participant in that,” Emond said.
“When he comes here and says unless you put the money in or we don’t get the loan, that’s putting the gun to our head. If he comes to us before he goes to CMHC and has the conversation with CMHC we would feel better.”
The transcript of the deputation comment above does not show Wagner made the claim Emond states. When asked if there was a point staff should have asked Wagner about the difference before the report was drafted (Wagner told the media he had no contact with anyone about the report council was given), Emond said:
“We don’t have an obligation to consult with him. He came in and made a presentation. If I’d had that information from Gayle (Jackson) last week, I would have raised that question when he was here,” Emond said. “I just think those who are in charge of the process need to think more about how that process gets unfolded so they don’t get the kind of reaction that they got tonight.“
He puts ‘being in charge of the process,’ on Building Hope. Most people dealing with any government body would tend to think there is no way they are in charge of any process, that being in the government’s hands.
Bottom line is, everyone has to speak and understand the same language. There is a lesson for others who may be approaching local government, or any other level, to ask more questions, be absolutely clear of the information given, because what they say isn’t always what you think it means. Make sure the bureaucratic and political side understands you clearly, especially if you are going to use their jargon words because they are going to think you are speaking their language, when you may not be.
(Photos by Swartz – SUNonline/Orillia; Building Hope Image supplied)
