Canada/Tax breaks for development of polluted land are back in Ottawa

Published on 27/11/2023 | La rédaction


Council this week rejected the city administration's recommendations to modify the brownfield redevelopment grant program.

This program offers subsidies to developers who build on contaminated land. It is designed to encourage the subdivision of Ottawa lands in need of remediation, often because polluting businesses such as gas stations were located there.

The program was suspended shortly after the last election so that municipal staff could review it and make recommendations on how it could be improved.

A revised plan was proposed that would have imposed new limits on the subsidy. The idea had been endorsed by Mayor Sutcliffe, who campaigned against tax breaks.

However, when it came to a decision on Wednesday, councillors rejected the proposed amendment by a vote of 14 to 8, resurrecting the program.

I'm disappointed," admitted Sutcliffe after the meeting. During last year's campaign and since I became mayor, I've heard time and again from Ottawa residents that they don't want to see big tax giveaways to developers to build on contaminated land.

The purpose of the program is to stimulate projects that developers would otherwise ignore.

However, the current procedure doesn't allow - and can't guarantee - that this would have been the case, according to Don Herweyer, acting general manager of planning, real estate and economic development.

I don't know how they could prove it," he told councillors.

Staff suggestions rejected by council would have tied the program to a new affordable housing incentive, eliminated the subdivision fee deferral and capped subsidies at $5 million or 50% of eligible costs.

161 million in subsidies approved to date

Ottawa was one of the first cities to adopt this form of subsidy when it launched the program in 2007.

Since then, the city has approved over $161 million in grants for 69 projects, although the actual funding is much lower.

Dozens of municipalities now have similar programs, all of which cover a much larger share of a project's costs.

Although City staff say it's impossible to know whether projects will go ahead without tax breaks, information provided to councillors suggests that it's likely that grants at least speed up project completion.

At a Finance and Corporate Services Committee meeting earlier this month, three members of the public - including a retired Ottawa employee who helped develop the program - spoke in defense of the program.

A few weeks later, city councillors echoed their arguments.

The program is, can be and has proven to be an advantage for cities. Other cities are more dynamic in this area than we are, and for good reason," said Kanata North councillor Cathy Curry. In the long term, it's a very good investment for the city.

She and other elected officials can't understand how city staff can write that the program has created 120,000 square metres of office spaceoffice space, 180,000 square meters of commercial space and thousands of permanent job opportunities, while recommending its restructuring a few paragraphs later.

Not for free, says CFO

The brownfield redevelopment subsidy program relies on what's known as property tax increment: when projects are built, they bring in more tax revenue for the city than it would otherwise receive. Many councillors rely on this fact, arguing that it brings in a lot of revenue.

However, City staff and the mayor believe this to be simplistic. If taxes go up, so do the costs incurred by the City to provide municipal services, explained Ottawa's General Manager of Finance and Corporate Services, Cyril Rogers. In other words, it's not free," he insisted.

Our primary mission is to recover the costs of the services we provide," said Rogers. We're not in the business of creating margins on our development.

In his view, the proposed changes to the program would have better protected the city's finances.

Political dimension

City Councillor George Darouze also spoke out in favor of reinstating the program as it stood, even though his rural ward was not really affected. He argued that elected officials were inappropriately politicizing an economic issue.

While brownfield grants focus on contaminated land, other grants in the same family are used to boost development in economically disadvantaged areas.

Sutcliffe campaigned against both at a time when the public was frustrated by the approval of a controversial $2.9 million tax break to a Porsche dealership in the Vanier district.

This is something the public really wants to control," said Shawn Menard, City Councillor for Capitale Ward. We're out of the game on this one.

Another part of the staff review focused on revising these community improvement programs. They were all adopted.

Councillors also followed city staff's recommendation to suspend the grant program for a development project near the airport. This is the only one of these programs for which City Council rejected a $13 million grant application for a hotel on the assumption that it would be built anyway.

In the future, Sutcliffe has promised that he will do what he has done since he was elected: vote against grant applications for projects that do not include affordable housing.

I intend to focus my energy on advancing brownfield redevelopment projects that include an affordable housing component and not support projects that do not," he said.

The board supported staff recommendations to relax criteria for other subdivision programs and to create a new tax break for projects that include affordable housing.


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