Municipal Development Incentives
Municipal Development Incentives
Most municipal concessions and rebate programs are designed to promote the growth and development of a community. Incentives vary based on each community’s resources, objectives and motivation to attract new development. More specific reasons to offer incentives may include the desire to stimulate business attraction, expansion and growth; commitment to decreasing the number of vacant commercial properties in the community; increase the long-term commercial assessment of the community and encourage the development of more residential properties.
Certain municipal development incentive programs are broad-based and include both residential and commercial developments. Other incentives may be focused on a specific type of development -- more affordable/appropriate housing options for workers/families, for example, or a specific area or site within the community that needs to be revitalized such as the inner city, downtown core, commercial park, etc. Incentives can be a onetime offering or they may stretch out over several years. Development incentive programs may support renovations and upgrading of properties, encourage adherence to a particular community theme or they may foster new construction. Often the incentive programs are available to existing property owners/business, the purchaser of a new property or a developer.
Most tax abatement incentives are time sensitive in that they must be acted upon within a defined period of time. Reductions in tax will generally cover one to four years with the full tax gradually being phased in completely. A survey of the whole province indicates exemptions range from phased-in tax over two years (100% in the first 50% in the second, full tax in the third) to a 100% rebate for up to four years with the fifth year requiring full payment of taxes. These tax abatements may apply to the total property tax assessment for the property or only to the assessed value of the improvements made to the property. There are usually several other qualifications which the applicant must meet. Tax incentives may also be offered for activities such as job creation.
Other development incentives a community might include are matching grants for property/ frontage improvements. These may be for general upgrades and improvements to the facades of buildings or they may be theme based requiring adherence to community heritage, for example. Such grants can normally only be utilized once within a set timeframe. The Towns of Hudson Bay and Carrot River offer these types of incentives. Moose Jaw is a community which developed incentives for adaptive reuse of properties with heritage designation. Credits may also be issued by a municipality for such things as utility services (water and sewer hook ups).
Many communities use a combination of tax abatement and grants to promote interest in development. An example of this is the ‘North Battleford Rental Development initiative’ which offers a five year tax exemption for new construction started and completed within 12 months, and a grant of $1,000 a year for each eligible unit for five years to a maximum of $20,000 annually. This incentive also provides for a delay of the final payment on any city-owned land which has been optioned by a contractor for rental development until a request for title transfer or an occupancy permit has been submitted.
New ideas are finding their way into many community incentive packages. The creation of public (all levels of government, including municipal, non-profit groups, faith based organizations) and private sector partnerships is a new approach to residential development in Saskatchewan and, for some communities, this is working exceptionally well. In 2007, Saskatoon introduced ‘Affordable and Entry-Level Housing Initiatives’ with a target of building 500 affordable dwelling units annually, to be achieved with the participation and partnership of numerous sectors including: government-supported providers, financial institutions, developers, investors and faith-based groups. The initiatives include: capital funding, property tax abatement, direct sale of city-owned land for affordable housing projects, priority review for approved housing projects, a new rental construction land-cost rebate program and permit rebates for secondary suites.
‘Community First’ is a multi-stakeholder initiative launched in Saskatoon which has provided funds for small business start-ups, and projects such as Juniper Housing, a low income housing project for seniors of Asian descent. Another example of creative incentives is Saskatoon’s ‘Equity Building Program’ which assists households with incomes between $44,500 and $70,000 with the purchase of an entry level home. Eligible households receive a down payment loan for 5% of the purchase price which must be re-paid over a five year period. Home buyers must be currently renting in Saskatoon and can purchase any home in the city that is priced between $180,000 and $280,000. The Equity Building Program is offered in partnership with Affinity Credit Union.
As municipalities become more competitive in attracting business and
people to create and maintain sustainable communities, there will be
increased pressure to provide creative development incentives based on
partnerships. What can you, as municipal leaders, do to enhance your community’s (and region’s) competitive advantages?
Saskatchewan South East Enterprise Region
April 4, 2011