Councillors here agree that when it comes to late payments, a large-scale project developer should pay the same penalty fees as local residents and business owners.
While the conditional permit agreement with Morguard Brock McLean Limited passed relatively smoothly at the Aug. 15 council session, the same could not be said for its development charges agreement with the township.
The company is developing land at the intersection of Brock and McLean Roads near Aberfoyle to provide a new regional distribution centre for Maple Leaf Foods.
Typically development charges must be paid before a building permit is issued, but in March 2012, council agreed to defer those charges, interest free, for 10 years.
The development charges being deferred amount to $544,499.
However, the draft before council last week drew concern from councillor Wayne Stokley regarding the amount charged for late payment after the 10-year deferral period.
Morguard’s request was that the amount be reduced to six per cent from the original 15% proposed.
That rate is what the township typically charges as a per annum rate on outstanding taxes (1.25% per month) and is what is also set out in the Development Charges Act.
The penalty interest would be charged retroactively over the 10-year period if the company does not pay the development charges when they are due.
Stokley said he believes the 15% rate should be maintained.
“I’m not sure why we should be dropping it to 6%.”
Councillor Susan Fielding agreed.
“Even though they say they are going to pay it, I find it questionable why they would suddenly want it dropped to 6%. Keeping it at 15% is a good incentive to make sure it gets paid.”
Fielding said she’d been concerned in the first place letting the developer off the hook for payment of development charges for 10 years.
“We need to make sure that money is recouped,” she said.
Councillor Ken Roth thought the rate should be tied in with the Bank of Canada prime plus a certain number.
Mayor Dennis Lever pointed out that the penalty charge is a retroactive interest charge.
“If they don’t pay it on the date it is due – the 10th anniversary of the issuance of the building permit – using the rule of 72 – it would result in almost a 100 per cent increase to the payment.” He estimated it would result in a charge of roughly a million dollars instead of one-half million dollars, “if they were one day late.”
“But if they intend to pay it (on time), what do they care about in the penalty interest rate?” asked Roth.
Lever said the decision is the will of council.
Councillor Jerry Schmidt agreed it would make sense to tie the rate to the Bank of Canada prime rate. He said that any change in the rate calculated over 10 years “can make a god awful difference.” Schmidt did not consider it to be a deal breaker to tie the penalty interest with the bank prime rate.
Even so, he agreed with Roth’s suggestion of a reasonable markup from prime rate.
Stokley compared the proposal rate for Morguard compared to charges to residents, other developers and commercial enterprises.
“If this application came through for them, it would be 15 per cent. If they default on taxes or so forth, which is what we are dealing with to a certain degree, then are we setting a precedent with other developers seeking to negotiate rates.”
Stokley said he wanted to ensure this was fair for the entire township.
Lever argued that “if another development of this size was to come along, they would be expecting us to negotiate.”
Fielding said the township already gave a huge gesture of goodwill by deferring the development charges for 10 years.
“I agreed to it at the time. The whole township will be out of those charges for 10 years. I want to ensure we will recoup that money.” She maintained that the 15 per cent penalty rate remains a good incentive to ensure the funds are paid on time.
“We’re giving them a break already, I don’t think we need to give them another one.”
Lever clarified that on the original vote, all of council endorsed the deferral of the development charges.
“We were in a competitive situation which required that in order for them to come here. Without that, they would not have come.”
Schmidt added that council cannot really compare this to a residential development.
“We’re talking about a multi-million dollar development. The interest based on 10 years is a lot of money as a penalty.”
He thought that in itself is an incentive.
Roth said what confused him about the matter is that if the bill is paid when it is due, the proponent really shouldn’t care about the penalty rate. “If they plan on paying it, and the interest rate was even 40 per cent, it shouldn’t matter.”
Roth said “the development charges are interest free for 10 years, so I don’t know why it is a contentious issue.”
Fielding agreed with Roth’s comment.
“If they are asking for a lower rate, we have to ask why they are asking for a lower rate.”
Fielding said if residents are being charged 15 per cent per year for late taxes, she felt it was inappropriate to waive those fees for large corporations.
Roth said he would be inclined to the leave the rate at 15 per cent.
Council’s decision was to leave the rate at 15 per cent for the penalty charge – with councillors Fielding, Roth and Stokley voting in favour and councillor Jerry Schmidt and Mayor Dennis Lever opposed.
