City of Calgary: Pre-Budget 2013 Submission. December 12 th, 2012

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1 City of Calgary: Pre-Budget 2013 Submission December 12 th, 2012 Real Property Association of Canada One University Avenue, Suite 1410 Toronto, Ontario Canada M5J 2P1 T: (416) F: (416)

2 Executive Summary Calgary has positioned itself as a municipal leader in the promotion of business, the environment, and quality of life for its residents. With new industries and businesses relocating to the city, the economy is well on its way in rebounding from the economic downtown. REALpac believes that following recommendations would help promote economic vitality and jobs, and improve the quality of life for residents: 1) Creation of Regional Transportation Plans 2) Ensure Fair Commercial to Residential Property Tax Ratios 3) Streamline Development Processes and Requirements 4) Ensure Responsibly Financed and Maintained Public Utilities 5) Create a Robust Municipal Sustainable Development Strategy About REALpac: REALpac is Canada's senior national industry association for owners and managers of investment real estate. Our members include publicly traded real estate companies, real estate investment trusts (REITs), private companies, pension funds, banks and life insurance companies with investment real estate assets of over $180 billion in Canada. The association is further supported by large owner/occupiers and pension fund advisors as well as individually selected investment dealers and real estate brokerages. REALpac is an exclusive, executive organization whose vision is to be Canada's most influential voice in the real property investment industry. The association is stewarded by a board of directors populated by some of the industry's most senior leaders, and is further guided by the strong work of its standing committees. The association staff, charged with implementation of policy and execution of all day-to-day activity, is composed of highly educated, dedicated and experienced staff who strive continuously to increase the "value for membership" afforded each member. Contact Us: Paul Morse Ryan J. Eickmeier Chief Executive Officer Director, Government Relations & Policy (416) ext. 225 (416) ext. 224 pmorse@realpac.ca reickmeier@realpac.ca 2

3 Mayor Naheed Nenshi Office of the Mayor The City of Calgary P.O. Box 2100, Station M Calgary, AB T2P 2M5 December 12 th, 2012 Re.: City of Calgary 2013 Pre-Budget Consultation REALpac would like to thank the City of Calgary for engaging Canadians in this consultation process. We see this as an integral aspect of policy development that will undoubtedly result in the betterment of this municipality. The 2013 operating budget can set the stage for significant business growth, increased environmental awareness, and an overall thriving economy. As the voice of real property across Canada, REALpac believes our industry is a vital player in stabilizing the economy, creating jobs, and promoting economic growth nation-wide, with Calgary acting as a strategic area for our membership. This consultation provides an excellent platform for REALpac to identify cost-neutral, progressive policy changes and initiatives that will benefit the municipality, create jobs, help families, and support other industries. As an association, REALpac s advocacy efforts are geared towards doing what is best for everyone, and not just the commercial real estate industry. We recognize that municipal economies across Canada rely on many sprockets to operate efficiently, and we diligently examine jurisdictions around the world to develop best practice approaches that we believe will further strengthen it. The following are recommendations that REALpac believes should be addressed in the 2013 Budget: 2013 Budget Recommendations 1. Creation of Regional Transportation Plans Funding new transportation infrastructure has become one of the most pressing issues for regions across Canada. As the senior national industry association for investment real estate, REALpac s members have an inherent interest in a streamlined, reliable, modern, and sustainably financed transit plan. REALpac maintains a set of guiding principles when engaging government officials in discussions regarding financing of transportation infrastructure. REALpac supports: Good, responsibly financed transit and transportation infrastructure as it is important to the social and economic viability and sustainability of regions; 3

4 Revenue sources that are broadly based and do not put undue pressure on one segment of the economy; Revenue sources that are environmentally friendly and have traffic demand management potential; Revenue sources that support user pay principles; in other words, those that use the transportation system should pay for it; Revenue sources that are transparent, fair, and equitable; and, Revenue sources that solve the long-term, transit-related financial challenges of regions across Canada. As a sector, we seek to be included in transportation related discussions. 2. Ensure fair commercial to residential property tax ratios We would like to draw your attention to the release of the 2012 Property Tax Rate Analysis (see attached). REALpac and Altus Group release an annual Canada-wide survey of property tax rates of major urban centres; the results for the eight Canadian municipalities that have been analyzed are then utilized to promote tax fairness across the county. The commercial property class generally and office space specifically are major net economic contributors to municipalities that house them and high property taxes are a major reason why tenants will choose to relocate from downtown cores to suburban municipalities. REALpac believe that high urban commercial property taxes: Send jobs and development out of city centres and contribute to urban sprawl; Work at cross purposes with hub-and-spoke transit, which brings people to and from downtown cores; Penalize investment in downtown office, hotel, apartment and retail, particularly during periods of high vacancy; Punish small and medium size businesses who are tenants (usually under "net leases") of downtown offices; and Disincent major international tenants from locating in those particular cities. Results: 2012 Property Tax Rate Analysis The 2012 survey yielded both encouraging and alarming results. At the high end of the spectrum, Vancouver (4.32), Toronto (4.13), and Montreal (4.09) persist in posting the highest commercial to residential tax ratios, which are all in excess of 4:1. While concerns linger, Vancouver and Toronto maintained their downward trend for the fifth consecutive year, subsequently creating a more favourable business environment. In contrast, Montreal continues to trend upwards at an alarming rate that will likely vault them past Toronto by next 4

5 year and will be rapidly approaching Vancouver should their ratio continue to increase. On the opposite end of the spectrum, the cities of Winnipeg (2.03) and Edmonton (2.46) raised their ratio slightly, yet were able to maintain the lowest ranking amongst municipalities surveyed. Calgary (2.63) and Ottawa (2.64) also made significant improvements to their ratios, while Halifax (2.94), falling closer to the average, published subtle reductions to its ratio as well. On an absolute tax basis, Calgary, Vancouver, Edmonton, and Winnipeg populate one end of the spectrum with the lowest estimated property taxes per $1,000 of commercial assessment while Montreal, Halifax, Ottawa, and Toronto maintain the highest. From a residential assessment standpoint, Vancouver, Calgary, Edmonton, and Toronto preserve the lowest property taxes per $1000 of residential assessment while Winnipeg, Ottawa, Halifax, and Montreal have the highest. The general trend amongst most cities in Canada is decreasing commercial tax rates to promote business growth. Residential tax rates have also declined over the past ten years at an even faster rate than those of commercial tax rates. REALpac is committed to working with the City of Calgary on achieving tax fairness. The continued reduction of excessive property tax burdens on commercial and industrial properties will make the city more competitive, promote jobs and investment, result in increases to the property assessment base, and subsequently generate more stable and sustainable revenue. Collectively, we believe that Calgary should work towards a commercial-to-residential ratio of about 2:1 through gradual reductions in the commercial rate. Provinces and municipalities alike have shared interests in the economic vitality of major urban centres, and it would be prudent to ensure this vitality is achieved. Calgary s gradual reductions over the past five years is making the city a more favourable place for businesses to locate, compared to other major municipalities who continue to increase their rates. If Calgary seeks to remain as a top Canadian location for doing business, it is important for the municipal government to do all it can in attracting and keeping these tenants through favourable tax policies. 3. Streamline Development Processes and Requirements Municipalities across Canada maintain varying requirements and approval time frames related to development applications. Notably, development requirements include application fees, development charges, parkland dedication (or cash-in-lieu), parking requirements (or cash-inlieu), and the implementation of green building standards. Using results from our 2012 Development Process Survey, REALpac will work with key municipalities across Canada to ensure that their respective development process does not have an adverse impact on the fiscal viability of development: 5

6 Canada-Wide Development Process Survey - Results Application Processing Times Application processing times are most often longer in Toronto, Mississauga, and Montreal than in any of the other cities surveyed, although the reasons for longer processing times were not identified in this survey. A best practice that has been implemented by half of the cities surveyed (including Calgary, Regina, Toronto, Ottawa, and Halifax) is the adoption of targets for the length of time it should take to process a development application. If achieved, these targets provide a level of predictability and accountability to developers. Application Fees & Charges Although it is difficult to compare many application fees due to variations in how they are structured from one municipality to the next, comparisons were feasible for City Plan Amendments and Zoning By-Law Amendments. For City Plan Amendments, fees are substantially higher in Mississauga, Ottawa, and Toronto than elsewhere. Mississauga and Toronto also reported the highest fees for Zoning By-Law Amendments, alongside Vancouver and Calgary. Infrastructure charges for commercial uses were highest in Ottawa, Toronto, and Vancouver. Parking Standards For office uses within a downtown, the highest parking requirements were reported in Edmonton, Vancouver, and Mississauga. Edmonton also reported the highest parking requirements outside of a downtown, along with Mississauga and Halifax. For retail uses, the highest parking requirements within a downtown are in Winnipeg, Mississauga, and Calgary, and outside of a downtown, in Toronto, Mississauga, and Regina. For any use, the cash-in-lieu of parking fee was by far the highest in Calgary. Parkland Dedication Parkland dedication rates are highest in Calgary, Edmonton, Winnipeg, Montreal, and Halifax, at 10% of the development site. Reduced fees for commercial and industrial uses are offered in Regina, Toronto, Mississauga, and Ottawa, which can be considered a best practice because it offers a break for job-creating land uses and amenities that serve residential areas. This works in the favour of both developers and municipalities by reducing development costs, and promoting a desirable land use mix (thereby reducing travel distances and facilitating transit use, cycling and walking). It can also be considered a more fair approach to parkland dedication since residential uses typically generate a higher demand for parkland than nonresidential uses. Density Bonusing & Transfer Most municipalities use bonusing to permit an increase in height or density in exchange for public benefits. The only two municipalities surveyed who do not permit bonusing are Winnipeg and Montreal. The practice of permitting density transfers is far less common, occurring only in Vancouver, Calgary, Mississauga (rarely), and Ottawa. 6

7 Bicycle Parking Standards Out of all the municipalities surveyed, Edmonton has adopted by far the highest short-term bicycle parking requirements for office and retail uses within its downtown, followed by Ottawa and Vancouver for office uses, and Vancouver and Regina for retail uses. Of the municipalities surveyed, only Mississauga has not adopted mandatory bicycle parking requirements. Sustainable Development Standards Of the municipalities surveyed, Vancouver, Calgary, Toronto, and Mississauga have prepared sustainable development standards and guidelines for achieving energy efficiency and other green objectives. Of those municipalities, Calgary and Mississauga provide voluntary guidelines, while Vancouver and Toronto offer a mix of voluntary and mandatory standards. REALpac believes in fair, streamlined, and efficient development processes in Canada s major urban centres and will use these findings to identify municipalities whose processes sit as negative outliers, and engage them in discussions on how and where they can improve. 4. Ensure responsibly financed and maintained public utilities REALpac and its member companies have an inherent interest in the short and long term goals of utilities across Canada. As major resource consumers, we recognize the importance of addressing capital funding deficiencies, and ensuring the long term sustainability of the infrastructure needed to deliver these services. As municipalities begin to engage re-investment strategies into their utilities, REALpac seeks to ensure that changes to the funding process are done in a manner that: Is fairly and evenly distributed amongst the commercial and residential sector alike; and, Where possible, tied to the current method of consumption based usage measurement. As a sector, we seek to be included in discussions regarding major utility infrastructure investment, and ensure that all funding options are explored thoroughly and fairly. 5. Create a robust municipal sustainable development strategy The real property sector is a significant energy and resource consumer. It plays a sizable role in the production of greenhouse gases, consumption of water, and the production of solid waste. As the sector continues to evolve, there are opportunities to help reduce the impact of commercial buildings on the environment. Municipal governments across Canada have made considerable progress towards the advancement of green building policies, and Calgary has 7

8 remained at the forefront of these efforts. However, in order to achieve an ambitious, sustainable target, all cities must further commit time and effort to set a precedent nationwide. While municipalities across Canada do not possess the same resources as the federal or provincial government when it comes to sustainable development, there are still several ways they can be instrumental in helping reduce the commercial real estate s environmental footprint. REALpac would like to see the City of Calgary engage in the following initiatives: Addressing Climate Change and Air Quality A 50% increase in the service standard if for a LEED or other green building permit; and, Widespread creation of Green Precincts. Maintaining Water Quality and Availability Taking into account water conservation in local planning documents; and, Water utility programs to incent water conservation and greywater systems. Shrinking the Environment Footprint Beginning with Government Encouraging government buildings to seek LEED or an equivalent certification; and, A building permit turnaround of half the normal service standard for green buildings standard for all municipalities (e.g. from eight days to four days). The task of creating a sustainable development strategy for Calgary that yields favourable economic conditions is certainly expansive. REALpac believes the perspective of the real property sector can provide insight and guidance as your government moves along in this process. The ideas presented in this letter are ambitious but attainable under a strong strategy that pools together the full reach and resources of the public and private sectors. The key economic stimulus that would result from such initiatives includes job creation, economic growth, and energy cost reduction. The recommendations made in this consultation represent what REALpac believes to be significant ways for the City of Calgary to move forward economically and environmentally. If you have any questions regarding the recommendations outlined in this consultation, please contact Ryan J. Eickmeier at reickmeier@realpac.ca or (416) ext

9 Regards, Paul Morse Chief Executive Officer Ryan J. Eickmeier Director, Government Relations & Policy 9