New Ontario legislation that defers the due date for development charges is expected to ease upfront costs for condominium developers and create cash flow headaches for some municipalities. The City of Toronto projects that a longer wait to collect development charges that were previously payable with the issue of building permits will translate into a $1.9 billion budgetary void over the next 10 years.

A package of recent amendments to Ontario’s Development Charges Act brings the new remittance schedule for builders of ownership housing, allowing them to split development charges into annual installments to be paid during the five years following initial building occupancy. Rental housing and institutional buildings already qualified for deferred development charges prior to this adjustment, but another legislative amendment now eliminates municipalities’ ability to charge interest on outstanding balances.

These changes were introduced through the omnibus Bill 17 — containing amendments to eight different provincial statutes related to housing and infrastructure development — which was tabled and adopted over the course of four weeks this spring. Other new measures pertaining to development charges:

• ensure that developers will pay the lower of either the development charge rate at the time they submit a complete application or the rate at the time building permits are issued;
• clarify where developers may be entitled to credits; and
• Exempt for-profit long-term care home from development charges.

A new report to Toronto Council’s executive committee notes that the changes will significantly shift the timing of when the City receives development charges. In response, Toronto officials are asking the Ontario government for more scope in how they can spend both development charge revenues and provincial infrastructure funding in order to address anticipated cash flow interruptions.

“While these funds will ultimately be recovered, the delayed revenue will affect the City’s short-term financial capacity to deliver additional critical growth-related infrastructure and will require the City to reprioritize planned capital projects,” the report states. “In addition, the City will experience higher DC collection risk upon payment deferral to occupancy, in the absence of further Provincial actions.”

To address the latter possibility, the report calls for an “appropriate collection mechanism” with enforcement tools to guard against unpaid development charges flowing through to condominium unit owners. It suggests that full payment could either be a requirement for registering a condominium or secured by an agreement that’s registered on the land title.

The legislative amendments also clarify that residential developers will continue to have the option to voluntarily pay development charges in full ahead of the required due date.