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Municipal Financial Tools for Planning and Development Series

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Spring 2003

There are dynamic planning and financing programs going on in Ontario and municipalities are catching on quickly.  As local governments seek means to revitalize their communities in value-added ways, they are evaluating what needs to be restored and rehabilitated.  Old waterfronts, former manufacturing and commercial lands, run-down mainstreets, underused warehousing districts and heritage structures are all up for scrutiny.  The goal is to renew the built environment to capture the economic, social, environmental and cultural benefits that will drive their growth in the 21st century.  But the complexities and expense of these projects can be daunting.  Municipalities need new, outward-looking financing means to harness the experience, creativity and ingenuity of both the public and private sectors and to facilitate economies that can be sustained now and in the future.

What is tax increment-based financing?
This financing incentive is based on municipal grants and loans that can be given under the Planning Act’s community-improvement provisions (section 28).  By calculating a grant or loan on the higher property tax that is generated from development (the tax increment), municipalities can offer eligible developers financing incentives that will put lands and buildings that might not otherwise be developed, back into productive use.

The planning and financing framework
Municipalities can designate an area or the entire municipality as a community-improvement project area.  They can then implement a community-improvement plan (CIP) with grants and/or loan provisions which can, at the option of the municipality, be calculated on a tax increment basis.

Steps to implementing a community-improvement plan program

Step 1
Develop official plan policies relating to community improvement.
(These policies are the broad principles.)

Step 2
Identify and designate the community-improvement project area with a by-law.
Develop the CIP. 
Fulfil the requirements for notifying the public. 
Adopt the CIP.

Step 3
Submit the CIP with financing programs to the Minister of Municipal Affairs and Housing for approval.

If the Minister’s decision is appealed, the Ontario Municipal Board process applies.

Step 4
Implement program(s) identified in the CIP.

Powers available for implementing the CIP:

  • Acquire, clear and hold land;
  • Construct, repair, rehabilitate or improve land and buildings;
  • Sell, lease or dispose of land; and
  • Provide grants and loans.

Some of the benefits:

  • rehabilitation of lands and buildings in designated community-improvement project areas
  • reuse of former industrial and commercial lands (brownfields)
  • cleaner, healthier, safer and more livable environment
  • increased economic activity, investment and competitiveness
  • rejuvenated neighbourhoods, core areas and communities
  • better use of existing infrastructure, services and facilities
  • attractive physical landscapes that create pedestrian-safe environments

Brownfields legislation comes into force
Effective December 1, 2002, sections of the Brownfields Statute Law Amendment Act, 2001, and two related regulations came into force.  Portions of the Environmental Protection Act, Ontario Water Resources Act and Pesticides Act were proclaimed, while all of the changes to the Planning Act and the Municipal Tax Sales Act (now part of the Municipal Act, 2001) are now in effect.  Specific information relating to the proclaimed provisions can be found in the November 9, 2002 edition of the Ontario Gazette.  The two regulations can be found in the November 16, 2002 edition.

An Ontario Tax Increment-Based Model

Assumptions for grant calculations:

  1. Municipal tax portion before redevelopment  is $10,000
  2. Municipal tax portion after redevelopment is $110,000
  3. Tax increment is $100,000
  4. The grant is paid over 10 years.  The payment in the first year is equal to 100 per cent of the tax increment.  Each year the payment is reduced by10 percentage points until the payments stop altogether in year 11.

Projected outcome:

  • Municipal tax portion for years 1 through 10 = $1 million
  • Grant value for the years 1 through 10 = $550,000

Graph showing taxes after redevelopment - taxes before redevelopment = Tax Increment $110,000 less $10,000 = $100,000

For more details see the Municipal Financial Tools for Planning and Development handbook available on the Ministry Web site.

City of Cambridge

 

A photo of the Historic Galt City Centre - East Bank of the Grand River, City of Cambridge

Historic Galt City Centre
East Bank of the Grand River

Restore, Rebuild, Rejuvenate!

To stimulate property improvements and investment in the Cambridge downtown core areas:

The City of Cambridge offers a tax increment-based grant under the Realty Tax Rebate Program.

What is it?  A three-year phased program providing grants equivalent to a percentage of the city’s portion of the increase in property taxes as a result of property improvements.

Eligible sites?  All properties in the core areas   Galt City Centre, Hespeler Village and Preston Town Centre (boundaries defined in the city’s official plan).

Eligible developments?  Property improvements that result in an increase in city property taxes, including the restoration and redevelopment of contaminated sites.

Access to the legislation and gazettes: 
Visit the government’s Web site at
www.e-laws.gov.on.ca and www.ontariogazette.gov.on.ca

For more information contact:

MINISTRY OF MUNICIPAL AFFAIRS AND HOUSING
Web site:  www.mah.gov.on.ca

MUNICIPAL SERVICES OFFICES

Produced by the Provincial Planning and Environmental Services Branch

ISBN 0-7794-4280-6
© Queen’s Printer for Ontario, 2003

Disponible en français
Financement équivalant à de nouveaux impôts fonciers