When Melfort expands, there’s a need for new infrastructure. A development levy paid by developers is designed to pay for that, but home builders want the city to review that policy.
The levy was put in place four years ago. Rick Lang, Melfort’s mayor, said when fully implemented, the levy will pay for the paving, water, sewer and other services needed to support new homes and businesses.
“The reality is: you have to acquire that money from somewhere for that infrastructure because taxation typically pays for services that are currently being rendered, but they don’t pay for anything that’s going to develop because of expansions.”
That said, the city is taking the process slowly. Residential development levies are being phased in over a period of 10 years, so developers only have to pay 40 per cent of what it will eventually cost. Commercial development levies are being phased in over a period of 20 years.
Humboldt decided to put in development fees over a period of two years.
“In Melfort, we decided we didn’t want that sticker price shock onto the lots because we wanted to bring it in slowly so it wouldn’t impact our construction people as drastically,” Lang said.
Before the development levy, there was no way the city could cover the costs of expansion. The mayor said since there was no money dedicated to that, what the city would do is pay for it by taking funds from its capital program, which is supposed to be devoted to replacing old infrastructure.
“That’s why some of the things in the past have probably suffered to the point where people find that they’re unacceptable now,” Lang said. “We’re trying to deal with that idea of being able to handle the expansion but also have money in place for the replacement of things that need replacing.”
At an annual meeting between the city and local home builders , the contractors said land costs continue to increase in Melfort, but selling prices have dropped by four per cent over the last five years. That makes it hard to justify building a home without a buyer secured.
What’s more, the average price of a lot in the city has increased from $57,000 in 2013 to $65,000 in 2017 – and is expected to be $79,000 in 2022.
Since land costs should be 20 per cent or less of the price of a home, it also makes it difficult to build new homes aimed at the lower end of the market.
That’s why local home builders want the city to review the levy and determine if it’s a disincentive for new housing starts.
“Since new development benefits the whole community, it may be desirable to reduce, eliminate or put a freeze on increases to the levy charged to new development,” said a report resulting from the meeting between the city and the home builders . “The result could bring construction costs to a level that may encourage new development.”
The home builders are also open to anything else that would reduce land costs.
At a committee of the whole held March 15, council instructed city staff to present them with options.
The mayor said the development levy has come back to the council table before whenever clarifications or refinements have been needed.
