While certain municipalities have introduced regulations allowing them to collect development fees—also known as “development charges”—this legal provision remains much underused by the larger majority of municipal bodies in the province.

The purpose of this article is to inform municipal representatives of this interesting financial lever that can support expenditures related to the growth of infrastructures on municipal territory.

New enabling powers as of 2016

First, remember that municipalities’ tax and royalty options were broadened in the past few years. Today, the powers available to municipal bodies to generate income are grouped into three major categories:

1. General tax and fee power: according to the Cities and Towns Act, sections 500.1 to 500.11;
2. Varied rate taxation and tariffs: in accordance with the Act respecting municipal taxation in sections 244.38 to 244.64.9 for varied rate taxation and in sections 244.1 to 244.10 for tariffs;
3. Development fee: according to the Cities and Towns Act, sections 145.21 to 145.30.

Today, we will briefly focus on this third component authorized by Quebec, while examining some examples of by-laws already adopted by municipalities.

What’s the scoop on this new legal provision? Since 2016, the Quebec government has given municipal councils the possibility of introducing a fee to make owners who apply for a permit contribute to financing the work that the municipality will have to do to meet the increase in municipal services.

According to section 145.21 of the Act respecting land use planning and development, a municipality’s council may, by by-law, make the issuance of a building or subdivision permit or a certificate of authorization or occupancy subject to:

1. the conclusion of an agreement between the applicant and the municipality regarding the carrying out of work related to municipal infrastructures and equipment and the assuming or sharing of the costs related to this work;
2. the applicant’s payment of a contribution to finance all or part of an expense related to the addition, expansion or modification of municipal infrastructure or equipment required to ensure the increased delivery of municipal services resulting from the initiative covered by the permit or certificate application.

The municipal equipment referred to in subparagraph 2 of the first paragraph does not include automotive equipment with an expected useful life of less than seven years nor computer equipment.

For municipalities, these fees are growth contributions to meet capital needs driven by real estate growth, such as those related to the renovation or construction of fire stations, libraries, sewage disposal infrastructure, etc.

These “development charges” may be charged for additions, expansions or modifications to municipal infrastructure and facilities, often already in existence, that are needed due to the increased demand for services generated by the permit application.

It should be noted that the infrastructures concerned are not only or primarily for new development, but for the municipality as a whole. Furthermore, the development charge must be paid before the permit or certificate can be issued, as it is directly payable under the by-law that provides for it.

Municipal by-laws relating to development charges

To date, a dozen or so municipalities have adopted a by-law to introduce development fees. Here are three examples.

Saint-Colomban

In 2020, this municipality adopted a by-law relating to the payment of a contribution to finance all or part of an expense related to the addition, expansion or modification of municipal infrastructures or equipment.

The purpose of the by-law is to finance the expansion or modification of municipal infrastructures or equipment required to ensure the increased delivery of municipal services resulting from the initiative covered by a permit application by making certain work subject to payment of a contribution.

The issuance of a permit is subject to the payment by the applicant, at the time of application for the permit, of a contribution in respect of the construction of a dwelling unit, the addition of a dwelling unit, and the remodelling of a building in connection with a change of use.

The total anticipated fees over the life of the by-law are estimated to be about $43 million for approximately 1,364 buildable housing units in the territory. For the year 2020, the fee amount was $5,994 for each housing unit covered by the by-law.

Carignan

In 2019, the City of Carignan adopted the by-law establishing the payment of a growth contribution when a new construction or subdivision permit is issued. This by-law authorizes the establishment of two funds, namely “Infrastructure – Recreation, Culture and Administration” and “Infrastructure – Environmental Health”. These funds are exclusively intended to collect the payment of the growth contribution required from applicants.

As for the “Infrastructure – Recreation, Culture and Administration” fund, the applicant’s payment varies between $1,200 and $2,400 per dwelling unit (3 ½ and less for a 5 ½) as well as per equivalent unit of commerce and industry.

With regard to the applicant’s payment of a contribution related to the “Infrastructure – Environmental Health” fund, the amount varies between $1,300 and $2,600 per dwelling unit (3 ½ and less for 5 ½) and per equivalent unit of commerce and industry.

Trois-Rivières

As for the municipality of Trois-Rivières, it introduced the by-law requiring the person requesting the issuance of certain permits to pay a financial contribution. Its purpose is to make the issuance of a construction or subdivision permit, or a certificate of authorization or occupation, subject to the payment of a contribution. The by-law creates a fund where the assets are intended exclusively to:

1. Foster and support the creation, development, redevelopment and upgrading of a park, green space, natural area, bicycle network or other conservation area;
2. Upgrade or increase the capacity of sewage discharge management facilities or infrastructures.

There are many application rules, but they include the construction of a single-family dwelling, for which the fee is between $375 and $875 per unit, the construction of a multi-family dwelling, where the fee is between $330 and $1,875, or the discharge of wastewater, for which the amounts vary. The projected amount for this open-ended fund is $2 million.

In short, this additional income diversifies the revenue sources for municipalities and supports infrastructure funding. In most cases, these measures are easily implemented through a by-law and the fees generate substantial revenues. Follow-up requires little effort on the part of municipal governments.

However, an important factor to consider when implementing such a by-law is that excessive fees may slow down real estate development and, as a result, hinder the growth of revenues and the municipality overall.