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GDS-007 - Urban Development Incentive Policy_2021 Title: Urban Development Incentives Policy Subject: Category: Growth and Community Urban Development Services Policy No.: 16-77.1 M&C Report No.: Effective Date: 2022-01-01 Next Review Date: 2023-01-01 Area(s) this policy applies to: Office Responsible for review of this External, Growth and Community Policy: Services Growth and Community Services Related Instruments: Policy Sponsors: M&C No 2015-238 Commissioner of Growth and M&C No 2016-077 Community Services M&C No 2016-307 Finance and Administrative Services M&C No 2019-084 Urban Beautification Grant Policy Document Pages: This document consists of 20 pages. Revision History: Adopted on March 21, 2016 Amended on December 12, 2016 Amended on April 23, 2019 City Clerk's Annotation for Official Record Date of Passage of Current Framework: I certify that this Policy was adopted by Common Council as indicated above. December 13, 2021_____ City Clerk Date Date Common Council Contact: Created: Approval Date: Growth and Community 2021-12-13 Services Contents 1. POLICY STATEMENT ................................................................................................................ 2 2. GOALS..................................................................................................................................... 2 3. GRANT OVERVIEW .................................................................................................................. 3 4. TIER 1 GRANT.......................................................................................................................... 4 4.1 PROJECT ELIGIBILITY REQUIREMENTS .............................................................................. 4 4.1.1 INFILL DEVELOPMENT .................................................................................................. 4 4.1.2 UPPER FLOORS REDEVELOPMENT ................................................................................ 4 4.1.3 VACANT BUILDING REDEVELOPMENT........................................................................... 5 4.2 TIER 1 GRANT TERMS ....................................................................................................... 6 5. TIER 2 GRANT.......................................................................................................................... 8 5.1 PROJECT ELIGIBILITY REQUIREMENTS .............................................................................. 8 5.2 TIER 2 GRANT TERMS ....................................................................................................... 9 6. CONSTRUCTION CHALLENGES GRANT ................................................................................... 10 6.1 CONSTRUCTION CHALLENGES GRANT TERMS ................................................................ 10 7. BUILDING PERMIT GRANT ..................................................................................................... 12 7.1 BUILDING PERMIT GRANT TERMS .................................................................................. 12 8. ADMINISTRATION ................................................................................................................. 13 8.1 GRANT APPLICATION REQUIREMENTS ........................................................................... 13 8.2 BUDGETTING AND PAYMENT OF GRANTS ...................................................................... 13 8.3 ADMINISTRATION AND EVALUATION OF APPLICATIONS ................................................ 14 8.4 GRANT AGREEMENTS .................................................................................................... 14 8.5 PROGRAM MONITORING AND REVIEW .......................................................................... 14 9. DEFINITIONS ......................................................................................................................... 16 10. APPENDICES.......................................................................................................................... 19 1 City of Saint John Urban Development Incentives Policy 1. POLICY STATEMENT The City of Saint John (the “City”) supports the revitalization of the Central Peninsula to achieve the growth targets defined in the Central Peninsula Secondary Plan and PlanSJ. The purpose of the Urban Development Incentives Policy is to establish a financial incentive program to encourage developers and property owners to invest in strategic areas within the Central Peninsula (Uptown, South End, and Waterloo Village), by creating residential units through either new construction or the redevelopment of existing buildings. Attracting new investment to the Central Peninsula is crucial for continuing the revitalization of Saint John’s most identifiable neighborhood, improving the City’s image externally and positioning the region as a leading urban centre with first rate amenities. The Urban Development Incentives Policy is strategically structured to reduce financial barriers and leverage new private sector investment in the form of Infill Development on Vacant Lots, the rehabilitation of underutilized or substandard housing, and the attraction of large catalytic projects. 2. GOALS The success of the Urban Development Incentives Policy will be determined on its ability to encourage new growth and investment to occur organically in the targeted neighbourhoods and its impact on achieving the following community outcomes: 1) A minimum per project 2 to 1 Return on Municipal Investment over 10 years 2) Implementation of the Central Peninsula Secondary Plan’s Growth Goals 3) Reinvestment in Heritage Assets and Underutilized/Substandard Building Stock 4) Resolving Construction Challenges Associated with the Central Peninsula 5) Core Area Beautification 2 City of Saint John Urban Development Incentives Policy 3. GRANT OVERVIEW The Urban Development Incentives Policy is designed to provide financial support to development or redevelopment projects with financial barriers or a high degree of risk. It is comprised of two tiers of grants to encourage projects that may not have otherwise occurred in the Central Peninsula. Each of these tiers offers a suite of incentives, with the objective of providing larger grants for projects with greater barriers to development. Tier 1 Grant The Tier 1 Grant offers a 5.25% refund of Construction Costs for eligible infill development, upper floors, and vacant building redevelopment projects over a five-year period, up to a maximum of $122,500 per project. Tier 2 Grant The Tier 2 Grant provides the largest possible funding amounts for large scale catalytic development projects, which have extraordinary barriers to development, are closely aligned with the City’s growth plans, and can provide the highest return on investment. There is no per project cap for eligible projects. Maximum grant payments are only limited by the Incremental Tax Increase received by the City set on a sliding scale of 90%, 80%, 60%, 40%, and 20% over 5 years. The Construction Challenges Grant The Construction Challenges Grant provides additional funding for both Tier 1 and Tier 2 projects which incur costs due to key challenges above and beyond standard residential/commercial construction projects. This grant pays a maximum of 5% of total Construction Costs up to a maximum of $50,000. The Building Permit Grant The Building Permit Grant provides a grant equal to 80% of the cost of the building permit fee up to a maximum of $10,000 for all Non-Market Housing Projects. 3 City of Saint John Urban Development Incentives Policy 4. TIER 1 GRANT 4.1 PROJECT ELIGIBILITY REQUIREMENTS 4.1.1 INFILL DEVELOPMENT The City hopes to encourage new infill development that increases residential density, promotes quality development and adds to the vibrancy of urban neighbourhoods. To be eligible, the project shall meet each of the following criteria: a. The building must be located within the boundary outlined on Schedule 1; b. The building must contain a minimum of two new residential units; c. Townhouse buildings must be a minimum of 2 storeys in height. The Floor Area of the second storey must be no less than 66% of the Floor Area of the First Storey; d. Multi-unit buildings with a Front or Flankage Façade that have a frontage greater than 20 metres must separate the massing of the building façade through variations in siding materials, colour, or façade projections; and, e. The project must have a minimum construction cost of $450,000. 4.1.2 UPPER FLOORS REDEVELOPMENT These types of projects convert the upper floor spaces of the historic mixed use building stock of the Central Peninsula. The City hopes to re-invest in the preservation of its historic building stock and to enhance the vibrancy of the Uptown area. To be eligible, the project shall meet each of the following criteria: a. The building must be located within the boundary outlined on Schedule 2; b. The building must contain a minimum of 1 new residential unit out of floor space that is either currently used for warehousing or storage or currently vacant and comprised of Uninhabitable Floor Space; c. A minimum of 20% of the building must be residential after the project is completed; and d. The project must have a minimum construction cost of $200,000. 4 City of Saint John Urban Development Incentives Policy 4.1.3 VACANT BUILDING REDEVELOPMENT These types of projects target buildings that have experienced high levels of vacancy resulting in a cycle of financial loss and the deterioration of the building. The City hopes the redevelopment of these buildings will provide quality housing. To be eligible as a vacant building redevelopment, the project shall meet each of the following criteria: a. The building must be located within the boundary outlined on Schedule 1; b. The building must create a minimum of 1 new residential unit; c. The building meets one of the following criteria: i. The building has a residential property assessment as determined by the Government of New Brunswick’s Property Assessment Services of less than $65,000; ii. A minimum of 20% of the building is Uninhabitable Floor Space; or, iii. The building’s prior use or design was for an Institutional Land Use. d. The building must have been vacant for at least 1 year; e. Projects that remove any architectural elements must replace them with new architectural elements that have an appearance similar to the architectural style of the building; f. The City may conduct an inspection of the building to confirm eligibility; and, g. The project must have a minimum construction cost of $150,000. 5 City of Saint John Urban Development Incentives Policy 4.2 TIER 1 GRANT TERMS a. Tier 1 Grants will be provided over a 5-year period according to the payment schedule outlined below. No single payment of the total grant shall exceed $35,000: Table A – Tier 1 Grant Payment Schedule Grant Year Percentage of Construction Maximum Grant Amount Costs 1 1.5% $35,000 2 1.5% $35,000 3 1.125% $26,250 4 0.75% $17,500 5 0.375% $8,750 Total Grant 5.25% $122,500 b. To receive a Tier 1 Grant, a project must meet the minimum program eligibility requirements described in Section 4.1 for an infill development, upper floors, or vacant building redevelopment; c. An application for a grant will not be considered if the building permit cost estimates differ from the cost estimates submitted as part of the grant application; d. Grant applications will be received, reviewed, and awarded on a first-come, first-serve basis until the annual budget approved by Common Council for this Policy has been exhausted; e. If more than one application is received and deemed eligible at the same time, projects shall be approved and grants awarded according to the greatest number of residential units created; f. In calculating the Tier 1 Grant, any eligible Construction Challenges Grant which has been applied for shall be deducted from the Total Project Costs; st g. No grant application will be accepted if it is submitted after September 1 in any given calendar year; h. Projects must be completed and in receipt of a final occupancy permit according to the following schedule to trigger the City’s payment obligation under the Grant Agreement: i. Projects with estimated Construction Costs below $2,000,000 must be completed by st November 1 of the year following the submission of an application. ii. Projects with estimated Construction Costs greater than $2,000,000 must be completed st by November 1 two years following the submission of an application. 6 City of Saint John Urban Development Incentives Policy st i. Projects for which applications were submitted later than July 1 of a given year will be provided an additional year to complete the project; and, j. Townhouse developments will not be eligible for payment until the completion of the second Townhouse unit of the project. 7 City of Saint John Urban Development Incentives Policy 5. TIER 2 GRANT 5.1 PROJECT ELIGIBILITY REQUIREMENTS These types of projects are of such a scale that they may act as a catalyst for the Central Peninsula. With large redevelopment targeting difficult to develop sites, these projects will require additional funding assistance, but in the long term magnify the goals of the Program and strengthen the City’s tax base. To be eligible as a catalytic development, the project shall meet each of the following criteria: a. The building must be located within the boundary outlined on Schedule 1; b. The project site must be identified as a potential infill project on Schedules A-D of the Central Peninsula Secondary Plan, or, have its existing designation as “Uptown Primary Centre” under Schedule B of the Municipal Plan; c. Notwithstanding 5.1(b), projects located within the Area identified as Big Move 2 on Schedule A of the Central Peninsula Secondary Plan shall not be eligible; d. The building must create at least 60 new residential units; e. The building must be mixed-use, i.e. contain a commercial portion on the ground floor; f. The project must have a minimum construction cost of $8,500,000; g. The project must have significant construction challenges estimated at more than $100,000; and, h. Once meeting the above criteria, all projects must prepare a business case, including but not limited to estimated property assessment, return on investment over 10 years to the City, and other economic and social benefits. An application for this grant is subject to final approval by Common Council. Said application can be either approved or rejected based on, among other things, budget considerations and advice provided by the Chief Financial Officer. 8 City of Saint John Urban Development Incentives Policy 5.2 TIER 2 GRANT TERMS a. Calculation of the Tier 2 Grant is based on the Grant Base Amount formula described below. This grant is based on the value of the building permit at the time of application. The formula provides an estimate of what the grant is calculated to be but may vary depending on the amount contributed to the Development Incentive Fund. i. Payments will be made over a five (5) year term based on the following formula: Grant Base Amount formula= Building permit value x (% of commercial portion of building x 0.025 + % of residential portion of building x 0.015) The Grant Base Amount calculated is applied to the table below to determine the estimated schedule of payments over the 5-year period. Table B – Estimated Grant Payment Grant Year Percentage of Grant Estimated Payment 1 90% 2 80% Percentage of Grant x 3 60% Grant Base Amount 4 40% 5 20% ii. The annual grant payment shall be the lesser of the Estimated Grant Payment in Table B and the Actual Grant Payment in Table C. No grant payment can be more than the Incremental Tax Increase on the property. Table C – Actual Grant Payment Percentage of Grant Grant Year Actual Payment 1 90% 2 80% Percentage of Grant x 3 60% Incremental Tax Increase (calculated annually) 4 40% 5 20% b. Projects must be completed within three years, in accordance with the building permit. 9 City of Saint John Urban Development Incentives Policy c. An application for this grant will not be considered if the building permit cost estimates differ from the cost estimates submitted as part of the application. 6. CONSTRUCTION CHALLENGES GRANT The Construction Challenges Grant is intended as an add-on to Tier 1 and Tier 2 Grants for projects which incur costs due to key challenges which are above and beyond standard construction projects. Applicants may be eligible to receive partial reimbursement of construction challenges costs upon the completion of the project. These constructions challenges costs must be estimated in advance and evidenced by receipts. 6.1 CONSTRUCTION CHALLENGES GRANT TERMS a. The Construction Challenges Grant will pay 25% of construction challenges costs, to a maximum of $50,000, or 5% of total Construction Costs, whichever is less; b. To receive a Construction Challenge Grant, a project must be eligible under Section 4 – Tier 1 Grant or Section 5 – Tier 2 Grant; c. All Construction Challenges Grants will be received, reviewed, and approved on a first-come, first-serve basis until annual budgets approved by Common Council for this Policy have been exhausted or the Policy has been discontinued; d. Tier 1 projects must involve one or more of the construction challenges outlined below: Challenges / Infill Upper Floors Vacant Building Project Type Development Redevelopment Redevelopment The breaking and removal of rock outcrops as part of site preparation in excess of $10,000 or 5% of project  × × costs, whichever is higher. Remediation of contaminated soils. × × Extension of sewer services where only  × × combined sewers exist. Installation of new or full replacement of sprinkler  systems for any floor of the building. × Construction that will bring the building within  Secondary Egress standards of the × Building By-law. Installation of a new elevator. ×  ×  Construction that will bring building within fire separation standards of the Building By-law. Removal of asbestos or lead paint. ×  ×  Cutting of new windows through brick or stone. ×  Structural or foundation repairs in excess × of $20,000. 10 City of Saint John Urban Development Incentives Policy Replacement of knob and tube electrical. ×  × e. Tier 2 projects must involve one or more of the infill development construction challenges outlined in 6.1(d). Similar construction challenges may be applied for and reviewed on a case- by-case basis; and f. Construction challenges costs estimates shall be evidenced by: A cost to construct budget approved by a professional architect, engineer, or project accountant; or, where an applicant is completing the approved work themselves and claiming only material costs, 1 set of cost estimates from a building supply store. 11 City of Saint John Urban Development Incentives Policy 7. BUILDING PERMIT GRANT The Building Permit Grant is intended to provide targeted assistance to Non-Market Housing Projects, as defined by this Policy, as a means of incentivizing mixed-income properties on the Central Peninsula. 7.1 BUILDING PERMIT GRANT TERMS a. The Building Permit Grant provides a grant equal to 80% of the cost of the building permit fee for the project to a maximum of $10,000; b. To receive a Building Permit Grant, a project must meet the minimum program eligibility requirements described in Section 4 for either an infill development, upper floors, vacant building redevelopment or Section 5 for Tier 2 Grants; c. The Building Permit Grant is only available to Non-Market Housing Projects; and, d. All Building Permit Grants will be received, reviewed, and approved on a first-come, first- serve basis until annual budgets approved by Common Council for this Policy have been exhausted or the Policy has been discontinued. 12 City of Saint John Urban Development Incentives Policy 8. ADMINISTRATION 8.1 GRANT APPLICATION REQUIREMENTS a. Applications for the Urban Development Incentive Program shall be made by completing Schedule 3. b. Applications shall be made prior to the Project Start Date. Should a project commence prior to an application being made, the project will be ineligible for a grant under this Policy. Once an application is submitted and a project has started, no revisions to a grant application will be considered. c. Applications shall include a building permit application appended to Schedule 3 – Application Form; however, all other criteria being met, an application may be submitted in advance of a building permit for the purposes of being added to a waiting list for one (1) month, thereby reserving any eligible construction challenges grant and/or building permit grant, after which time the application will be removed from the waiting list. d. Applications must be submitted the same calendar year as a building permit application. e. Legal names of the property owner(s) are required and if an applicant is acting on behalf of the owner, property authorization from the owner of the property. f. All costs associated with the preparation and submission of an application under this Policy is the responsibility of the applicant. The City shall not pay any costs incurred by an applicant in the preparation and submission of an application under this Policy, or any costs incurred in relation to the execution and delivery of a Grant Agreement. 8.2 BUDGETTING AND PAYMENT OF GRANTS a. The City will only enter into Grant Agreements the total yearly value of which does not exceed $200,000 for the Tier 1 Grants awarded in a given year. b. The City will only enter into Grant Agreements the total yearly value of which does not exceed $100,000 for Construction Challenge and Building Permit Grants. c. Should the annual base budget of $220,000 not be fully allocated in any given year, the residual will rollover into the Development Incentive Reserve Fund. d. Prior to payment of any grant(s) under this Policy, the City may withhold payment should it be determined that the property taxes and/or water and sewage fees for the property have not been paid in full. 13 City of Saint John Urban Development Incentives Policy e. Following the completion of the project, the applicant shall submit evidence confirming the construction challenges costs in the form of receipts for materials and work completed. f. The City may request an independent audit of the construction costs and/or construction challenges costs at the expense of the applicant. 8.3 ADMINISTRATION AND EVALUATION OF APPLICATIONS a. Growth and Community Services shall administer the Urban Development Incentive Program with the support of the Development Incentive Review Committee (DIRC). b. The role of the Development Incentive Review Committee (DIRC) is to confirm eligibility of applications in the context of the Policy criteria contained herein and as demonstrated by Schedule 3 and any supporting attachments such as plans, elevations, and building permits. c. The DIRC will consist of five technical staff members from one or more of the following City departments: Growth and Community Services, Financial and Administration Services, and Communications. A representative from Envision Saint John may also be assigned to the Committee. d. Technical staff members of the DIRC will be determined by the Commissioner of Growth and Community Services and members of the Committee may be removed or assigned by the Commissioner. 8.4 GRANT AGREEMENTS a. Applicants who meet the eligibility requirements must enter into the corresponding Grant Agreement in the form attached in Schedule 4 or 5 of this Policy in order to receive the grants contemplated by this Policy. The City’s obligation to pay the grants to an applicant is subject to the terms and conditions outlined in the Grant Agreement. b. The Mayor and City Clerk are hereby authorized to execute Grant Agreements with applicants in the form attached in Schedule 4 or 5 of this Policy when it is determined by those administering this Policy that an applicant meets all the eligibility requirements of a grant program outlined in this Policy. 8.5 PROGRAM MONITORING AND REVIEW This Policy is intended to be monitored on an annual basis in the form of review, evaluation, and tracking of key performance indicators. 14 City of Saint John Urban Development Incentives Policy $$ Paid Out Est. Value of Est. New (Year) / To be Work Annual Tax Paid Revenue Out (Completed only) Total Grants Vacant Building Grants Upper Floor Grants Infill Grants a. Review will be conducted by the Development Incentive Review Committee (DIRC) and comprise an overview of grants issued, value of construction, new tax revenue, future grant commitments, status of the Development Incentive Fund, and housing assessment of the Central Peninsula. If deemed necessary changes are required, a report will be made to Growth Committee and/or Common Council. b. Evaluation of the program will inform annual budgeting for the program and any changes to the grants and eligibility criteria contemplated by the program. c. Annual key performance indicators shall be submitted to the City’s dashboard for tracking program performance and consist of Grants Committed, Leveraged Investment, Number of New Residential Units, and Target of Leveraged Investment. d. A comprehensive review of the Program will occur before the end of 2022. 15 City of Saint John Urban Development Incentives Policy 9. DEFINITIONS The following definitions apply to this Policy: Basic Facilities: Facilities as required under sections 9 and 11 of A By-law respecting Standards for Maintenance and Occupancy for Buildings and Premises within The City of Saint John, By-law Number M-14. Construction Costs: Construction costs are the total cost of the construction of the building, including site preparation, mechanical and electrical components. Construction costs should be equivalent to the building permit estimate. Construction costs do not include: a. The cost of any engineering or design work; b. The cost of purchase of a building, land or assembly of land; c. The cost of demolition of existing structures; d. Soft costs such as legal services, financing charges, marketing and any other similar activities; e. Fees for municipal applications, approvals & permits; f. Provincial or Municipal Taxes paid during planning, construction, sale or operation of the project, including the payment of arrears to render a project eligible for funding under this Policy; and, g. The cost of constructing accessory buildings or structures. Development Incentive Reserve Fund: This reserve fund will be used to set aside to fund existing and ongoing grant commitments. First Storey: The first building storey above grade. Flankage Façade: The face of a building, with multiple sides fronting onto a street, which does not contain the Main Entrance. Floor Area: The total of all floor areas of a building or structure above and below grade measured between the exterior faces of the exterior walls of the building at each floor level, but does not include any area designed for parking. Front Façade: The face of the building that fronts on a street and contains the Main Entrance. Incremental Tax Increase: The total residential and commercial taxes received by the City one year following completion of the project and re-assessment of the property minus the total residential and commercial taxes received by the City the year the grant application was received. Infill Development Projects: New building developments located on Vacant Lots. 16 City of Saint John Urban Development Incentives Policy Institutional Land Use: Means the following uses listed and defined within By-law Number C.P. 111, The Zoning By-law of the City:  Community Arena;  Place of Worship;  Community Centre  Recreation Facility;  Community Policing Office;  Rehabilitation Centre;  Correctional Services;  School (9-12);  Crisis Care Facility;  School (K-8);  Cultural Establishment;  Supportive Facility;  Day Care Centre;  Supportive Housing;  Emergency Services Facility;  Technical or Vocational  Hospital; School; and  Library  University or College. Main Building: The building intended to accommodate the main use or uses permitted on a lot. Main Entrance: The primary entrance used for entering and exiting the building which fronts on the street used for the civic address of the building. Market Housing Projects: Means housing projects undertaken that are not receiving financial assistance under the Affordable Rental Housing Program of the Province of New Brunswick. Market housing projects exclude the following uses: a. Rooming houses; b. Special care facilities; c. Group homes; And d. Projects receiving the Province of New Brunswick’s Rental Residential Rehabilitation Assistance Program funding. Non-Market Housing Projects: Means housing projects that are receiving financial assistance under the Affordable Rental Housing Program of the Province of New Brunswick. Non-market housing projects exclude the following uses: a. Housing developments where less than 50% of units are subsidized; b. Special care facilities; c. Group homes; d. Rooming houses; e. Office space for a not-for-profit corporation. Project Floor Area: The total Floor Area being redeveloped as part of a development project. Project Start Date: With respect to Infill Development Projects, project start date means the date at which the pouring of the footings or foundation has begun. 17 City of Saint John Urban Development Incentives Policy With respect to upper floors and vacant building redevelopment projects, project start date means the date at which all interior demolition associated with the proposed redevelopment has been completed and work for which a building permit was required and obtained has commenced. Projects with a construction cost greater than $1,000,000 may identify project phases for the purpose of determining the project start date. Where phases are identified the project start date means the date which all interior demolition associated with the proposed redevelopment has been completed and work for which a building permit was required and obtained has commenced the first phase of the project. A phase may not be less than 20% of the Project Floor Area. Project Type: Means one of three project types, as defined by the Tier 1 Grant: infill development, upper floors redevelopment, and vacant building redevelopment. Applications may be eligible for no more than one project type and the project type selected on Schedule 3 shall determine eligible construction challenges costs for that project type. Reconstruct: To build or make something again where the structural integrity, functionality or physical appearance has been compromised beyond the extent of regular maintenance of the building. Townhouse: A building containing two or more dwelling units arranged side by side each with an independent exterior entrance and separated vertically by a common wall extending from the foundation to the roof. Uninhabitable Floor Space: Floor space proposed for residential conversion or upgrading that lacks Basic Facilities or is substantially damaged to the extent that new facilities must be installed or building components must be replaced or reconstructed to meet the following minimum requirements of A By-law respecting Standards for Maintenance and Occupancy for Buildings and Premises within The City of Saint John, By-law Number M-14: a. Section 9, Cooking Facilities; b. Section 11, Toilet, Wash and Other Sanitary Facilities; c. Section 13, Fire Protection Measures; d. Section 14, Egress; and e. Section 18, Doors and Windows. Vacant Lot: Land that does not contain a Main Building. 18 City of Saint John Urban Development Incentives Policy 10. APPENDICES Schedule 1 – Central Peninsula Eligibility Boundary Schedule 2 – Upper Floors Redevelopment Eligibility Boundary Schedule 3 – Application Form Schedule 4 – Grant Agreement Template (Tier 1 Grant) Schedule 5 – Grant Agreement Template (Tier 2 Grant) 19