Court decision on new construction fees reveals the power of Winnipeg's development industry

The recent court decision to strike down Winnipeg's impact fee on new development, and force the city to repay developers, was a major blow to both the city and Mayor Brian Bowman.

The court decision was another loss for the mayor, following on the heels of a court decision against the city on police pensionsand the Portage and Main referendum (that voted down Bowman's wish to reopen the locally iconic intersection).

And the city, which is already experiencing budgetary issues, has lost a major revenue source.

But there's another important facet to the impact fee story that has largely gone unnoticed in the news media:

Why does the City of Winnipeg lack the clear authority to levy such a charge in the first place?

For the uninitiated, Winnipeg introduced the impact fee in 2017 on all new residential units constructed in the city in order to cover, ostensibly, the cost of the new and improved infrastructure required by new development.

Currently, developers cover the cost of building certain new infrastructure, such as residential roads and basic sewer and water lines, while the city covers, among other things, the cost of new libraries, fire halls and expanding the capacity of existing streets and sewers to accommodate growth.

The fact that Winnipeg cannot apply such a charge is not only unusual in Manitoba. It is unusual compared to the rest of Canada.

The city argued that the impact fee was a charge for necessary infrastructure resulting from new development, and that it had the authority to level such charges under The City of Winnipeg Charter.

The development industry adopted the refrain that "development pays for itself," and, as a result, that the impact fee was an illegal tax, not a charge. The decision came down to differing interpretations of the city's charter.

Ultimately, the judge decided that the language of the charter did not grant the City of Winnipeg the authority to impose such a fee.

I believe the absence of language in the Winnipeg charter that would have enabled the use of impact fees or their equivalent is the most interesting aspect of this case.

It means Winnipeg is the only municipality in Manitoba that does not have such authority.

Fees levied in other municipalities

Every other municipality in Manitoba has the legal right to impose levies on development related to costs for infrastructure.

This authority comes largely from the Section 143(1) of Manitoba's Planning Act: "A council may, by by-law, set the levies to be paid by applicants to compensate the municipality for the capital costs specified in the by-law that may be incurred by the subdivision of land."

Many municipalities in Manitoba apply such charges, including cities such as Steinbach and Brandon, and rural municipalities such as East and West St. Paul.

East St. Paul, which borders Winnipeg to the north, actually applies seven such levies, which it categorises as "municipal development fees."

I would guess that the province omitted such a tool from the charter as a result of lobbying from the city's powerful development industry.

The fees cover the cost of traffic signalization, road rebuilding, water, sewer, environmental health services, active transportation, and "capital" costs more broadly.

A report compiled for the City of Brandon in 2017 estimated that East St. Paul's fees amounted to $19,200 per unit in 2013.

The City of Winnipeg is exempt from most of The Planning Act, including Section 143, and the Winnipeg charter provides no similar tool.

The fact that Winnipeg cannot apply such a charge is not only unusual in Manitoba. It is unusual compared to the rest of Canada, where municipalities big and small enjoy such authority almost uniformly.

Whether new development pays for itself or not, development charges or levies offset the cost of new infrastructure, enabling municipalities to use their limited capital funds to pay for the maintenance and upgrading of existing infrastructure.

The absence of such a tool in Winnipeg means the city has to make decisions about maintaining or replacing the old or building to accommodate the new.

Tool omitted from charter

Why does Winnipeg, Manitoba's largest city, not have access to such a tool?

I can only speculate, but I would guess that the province omitted such a tool from the charter as a result of lobbying from the city's powerful development industry.

The other explanation is that the province simply forgot to include the enabling language in the charter.

The fact that Winnipeg's developers took the city to court over the impact fee suggests that the first explanation is the more likely of the two.

While we certainly can view this court decision primarily as a loss for Mayor Brian Bowman, I view it more as an indication of how powerful and intractable the development industry is in Winnipeg.

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