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Thread: Making development pay for itself in small cities

  1. #1
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    Making development pay for itself in small cities

    Hello Folks:
    Am new to the profession and moving to a small rural city in Alberta. The City in question is facing a fiscal deficit and development is not really able to pay for itself. What can be done to raise revenue or make development pay for itself without scaring away developers with high taxes? The City in question is surrounded by oil rich neighbours who use its ammenities but refuse to inject funds for its development. Any ideas?

    Thanks
    BM

  2. #2
    Cyburbian Cardinal's avatar
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    I guess I would start with a question. Why can't development pay for itself? Is it that there is no demand? Is it that the cost of land and construction exceeds the potential return? Is it that local development standards are unreasonably high? There may be other ways to address the problem besides public subsidies.
    Anyone want to adopt a dog?

  3. #3
    Cyburbian Queen B's avatar
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    We always make the developer pay. That is just part of their decision to start the project.
    It is all a matter of perspective!!!

  4. #4
    Cyburbian
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    impact fees

  5. #5
    Cyburbian Cardinal's avatar
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    Let's not jump to conclusions. The poster is from Alberta, not far from places in the northern plains where I have done work. In some of these areas, the development economics do not work. There are too few potential buyers in a market where the population is shrinking, or may suffer a boom and bust cycle of development. Put up a new house and you may end up losing money. Yet it is still important for a community to have new housing to replace older housing that may be obsolete or worse. The same is true of business locations. The spaces built decades ago may be fine for some, but not all businesses. But what is the incentive to invest in a new building if you will lose a substantial part of your equity? Why not just move away? Of course, that may not be good for the community, and so places will subsidize development by building infrastructure or giving away free residential lots or whatever. If there is no budget for that, should they just shrug it off and sit back to shrivel up and die off?
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  6. #6
    Cyburbian jswanek's avatar
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    .

    Come up with parameters that would be much less expensive for the City to serve (no public streets, no public parking, no new public schools, libraries, parks, no extension of public utilities beyond the edge of the property, etc.), and then tell the developer he can build whatever he wants under those terms, sorting out the utility distribution himself...but only on half the land, reserving the rest for re-consideration in ten years.

    .

  7. #7
    Cyburbian
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    If you actually listen to business owners and developers, they tend to raise more concerns about the red tape and bureaucracy. Even small towns tend to develop too much bureaucracy--and business people have more state and federal agencies to contend with. Taxes are often just a simple check to write out--not delaying their projects. Red tape creates uncertainty, and many business owners eventually lose heart, give up, and move on to the next project.

    Business taxes and impact fees tend to just get passed on to the consumer. On a dreary note, a good impact fee schedule will deter those types of business where the cost of new infrastructure exceeds the benefit of the new project. Eventually, you get something that is nearly as profitable, but creates much less demand on municipal services.

    IMO, laissez faire beats corporate socialism any day. Business activity should never be subsidized because you have to tax the productive to subsidize the perpetual money losers... i.e., small startups subsidizing dinosaurs.

  8. #8
    Cyburbian Plus
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    Quote Originally posted by Queen B View post
    We always make the developer pay. That is just part of their decision to start the project.
    Same here,
    They put in the water, sewer, road and we inspect it.
    We use a letter of credit to insure the work is done and to specs.
    Oddball
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    Why don't you dig how beautiful it is out here?
    Why don't you say something righteous and hopeful for a change?
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    Are you sure you're not hurt ?
    No. Just some parts wake up faster than others.
    Broke parts take a little longer, though.
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  9. #9
    Cyburbian mike gurnee's avatar
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    [QUOTE=maxxoccupancy;556070]If you actually listen to business owners and developers, they tend to raise more concerns about the red tape and bureaucracy. Even small towns tend to develop too much bureaucracy--and business people have more state and federal agencies to contend with. Taxes are often just a simple check to write out--not delaying their projects. Red tape creates uncertainty, and many business owners eventually lose heart, give up, and move on to the next project.
    QUOTE]

    I had more than one developer inquiry turn and run over "red tape". That is, when I told them we enforce the international building code.

  10. #10
    Cyburbian Queen B's avatar
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    As for giving away lots for development. One local small town found that by offering buildable lots that there current housing stock sold much better. It was a draw to get people to town but when they looked around there was plenty of housing stock. Just one example.
    It is all a matter of perspective!!!

  11. #11
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    Joint Powers Board Get Money

    This is a very common situation in places where energy extraction is happening, and is common across the State of Wyoming. A lot of the towns have pretty lax zoning code, I mean it is a big deal to have adopted building codes, let alone extract impact fees and when the boom started in my town they had never had planning staff before, it was not setup to take advantage of the situation. The demand was here for development, so we would have been able to collect some funds, we might turned some developers away, but we would have ended up with higher quality projects. We require the developers install infrastructure before coming to final plat, or they have to put up a bond to ensure its completion, most developers install it rather than putting up the bond.
    One way it is handled in our area is there a joint powers board between the Towns & County Gov't that is basically setup to distribute funds to the Towns. In our area 95% of the tax revenue that is collected comes from energy producers, the County recognizes that the Towns feel many of the impacts, workforce housing, traffic/infrastructure, drugs/crime, etc. etc. So every year there is a certain amount, it has been $6mill that last couple of years and $2mil gets distributed to each of the 3 incorporated Towns in the County. Our fund is limited to infrastructure, and the Town reps have to present a project to the County if accepted the funds are earmarked for the project and distributed. We have used it to help upgrade many of streets/water/sewer in the last several years. We have also written a lot of grants to the State (who also collects gas money and redistributes).
    I'm not clear how money distribution works in Canada between Provinces and Cities and how the Province taxes oil sands/shale development. Anyway you might look into whether something like this is setup, I would assume there has got to be something, Canada is not new to energy development. But there may not be or it could be improved, obviously this would turn into a project for your electeds rather than a planning job..but if they are adverse to taxation they are going to have to get an aggressive offense.

  12. #12
    Cyburbian
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    In mining and oil boom towns there are two ways to go:

    1. Assume that the boom is short lived and therefore the town will return to a sleepy village or ghost town at some point in the future. In this case you can permit low-cost structures and infrastructure that is cost effective for the developer. A plan should be in place for decommissioning the developments when the boom is over.

    2. Assume the town will be there and successful for a long time. In this case you want to ensure that you are getting high quality structures, infrastructure and design because once the mine or oil boom is over your going to be left with the results. There may be opportunities into expand into tourism or retirement living in the future that will only be possible if you have a high quality town.

    The problem with the second option is that various towns or municipalities may be in “competition” with each other. A developer can build a higher-cost, high-quality development in your town or a lower-cost, low-quality development in a town ten miles further away. Therefore having too many rules may mean no new development. However if you want a high quality town at the end you have to stick by your guns.

    My strategy would be to figure out where the town is going to be in ten, twenty, thirty years and then ensure that any development that takes place today helps that long-term vision happen. You may need to suffer some short term pain to achieve long-term gains.

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