If voters turn down Abbotsford’s proposed Stave Lake water project, the city has said it will have to limit new development.
So what happens when a city purposely decides to slow growth?
According to city officials, the effects vary.
Abbotsford’s general manager of finance and corporate services, Pat Soanes, took a look at what impact no or slower growth would have on municipal taxation.
Based on the city’s five-year financial plan, impeded growth will reduce overall tax revenue. Each year the city collects tax from residents, commercial businesses and industry in order to run the city.
The city plans on $5 million to $6 million annually in tax revenue generated by growth. That increase each year helps pay for inflation, rising costs and wage increases for employees.
Assuming nominal development by 2016, growth revenue could be reduced by up to 85 per cent.
“That’s just under $5 million. What that means in terms of an additional tax burden would be about four percentage points more on top of what we would normally have.”
In 2011, the city had a property tax increase of 4.3 per cent.
“If you consider a normal year to be in the three and a half to four and a half percentage range, you’re now talking about a tax impact of up to eight per cent. That’s almost double,” said Soanes.
The effect of slower growth would not be realized immediately.
Ken Baerg, Abbotsford’s director of economic development, said in the short-term, housing starts would likely remain the same as developers “capitalize” on projects which are already approved. However, in the long-term, starts would “decrease dramatically” given the lack of support for any larger scale developments.
“City council will be faced with the dilemma of having to choose between projects, given the limited capacity,” said Baerg.
Projects which have yet to be approved, including Vicarro Ranch – a 1,400-home development concept on McKee Peak – expansion of the Auguston development, and the proposed university district, would be “called into question” as council is forced to prioritize where limited capacity will go.
In 2011, there has been $238 million worth of building permits issued (as of the end of October) in Abbotsford. Baerg said 91 per cent of those are for new projects. By slowing growth, millions of dollars that could have been invested in Abbotsford would be lost.
Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association, said a slowdown in development will cost a lot of jobs.
According to his data, about 108 different workers perform an “on-site job function” on a single-family home construction site. That equates to 2.8 full-time jobs for one year, for every home built.
“If you’ve got 1,000 housing starts, you just multiply that by 2.8 and that’s person years of employment created.”
He said those are both direct and indirect jobs.
“That’s where the ripple effect comes in. It’s like throwing a stone in a still point. It is immediate and far-reaching,” said Simpson.
He said the slowdown wouldn’t just affect the on-site workers, but also those working in the local manufacturing services, creating doors, windows and other supplies.
“Abbotsford certainly has its fair share of those types of industries.
“You can take it right out as far as the guy driving the catering truck, visiting the construction sites … it can be taken as far as you like.”
Simpson provided some statistics on the 2011 projected economic impact that residential construction has on Abbotsford.
Abbotsford’s total value of residential construction is listed at $463 million. That construction created 4,310 jobs (2,350 direct and 1,960 indirect). The total wages generated from those jobs is $223 million. That income was charged $39 million in taxes ($28 million federal and $11 million provincial), as well as $18 million in Canada Pension Plan premiums and $8 million in employment insurance premiums.
Residential construction in Abbotsford also generated $27 million in GST and $18 million PST/HST.
In 2010, 10.5 per cent of all employment in Abbotsford was in the construction industry.
The statistics are only for residential developments.
“Putting the brakes on development may be good for leverage, but long-term it’s not going to be good for the local economy,” said Simpson.
But will the city be able to limit development, considering the constant demand for more homes and more business opportunities?
Vladimir Dvoracek, head of the economics department of the University of the Fraser Valley, said the city may try, but growth is going to happen anyway.
“People are moving to cities,” he said. “I’m looking at the population of Abbotsford in 1956, it’s 16,000 … basically during my lifetime the population of Abbotsford has ‘tentupled.’”
And it’s a continuing trend that Dvoracek doesn’t think will change. He said people will continue to immigrate to Canada and people within the country will continue to migrate to desirable areas like Vancouver, Victoria and Abbotsford.
“This spat about the P3 water project and where Abbotsford is going to get its water from and so on – these are little ripples. But that big trend is going to continue and the pressure is huge. If you’ve got people willing to pay and willing to pay for development, there’s big political pressure within the community for that to happen.”
If the city limits new building permits, then Dvoracek said there will be a spike in land prices.
“But is that (limiting growth) really going to happen when you have this huge pressure of development money coming into a place like Abbotsford? I think that it’s not.”
STAVE LAKE ROUTE
If approved, the Stave Lake water project consists of several elements.
An intake valve will be located at the deepest point in the lake, close to the existing log boom.
From there a tunnel will link the intake to the pumping station located on the shore, next to Dewdney Trunk Road.
The water will then be pumped up to the new treatment plant, also located on Dewdney Trunk Road.
An exact location has yet to be determined for the plant. However, because of the planned higher elevation, the treated water can be gravity-fed from the plant to Abbotsford’s reservoirs.
From the plant, it will travel along approximately 20 kilometres of transmission line. It travels from the plant, along Clay Road to Wren Street and down to the Lougheed Highway.
It then goes across the river in a new line, and joins the existing water system at Gladwin Road.
Abbotsford has already begun working on improving the transmission lines in the Gladwin area. That work is not part of the $291-million Stave Lake project.
“It’s something we had to do anyway,” said city engineer Tracy Kyle.
The project will improve the replenishing of the Maclure reservoir with Norrish Creek water.
“The water mains are under-sized.”
A TAXING MATTER
One of the questions asked during public meetings regarding the Stave Lake water project is, if approved, how large a tax hike will residents face?
In fact, property taxes will not be affected. However, water rates will be.
The city has said that water rates will increase by approximately 10 per cent annually for the next five years, regardless of whether a new water system is undertaken, to provide an incentive for residents to conserve water.
If the new Stave Lake water system is approved and begins operation in 2016, the city’s current plan is to return to normal annual water rate increases of one or two per cent.
Money collected from Development Cost Charges (DCCs) will also be used to pay for the project.
Unlike a property tax increase, not all homeowners will be affected.
Residents in the Clearbrook Water Works District or someone on a private well will not be impacted, although they still can vote on the referendum.
Residents who do not pay for city water now will not have to pay anything toward the new system.
This year, the city altered its water rates to a tiered system that charges a higher rate during peak months.
Currently, city water users are charged $1.13 per cubic metre (1,000 litres) of water from November to April. However, from May to October, only the first 60 cubic metres used (over a two-month period) is $1.13 per cubic metre. From 60 to 90 cubic metres consumed, the price rises to $1.43, and for any amount over 90 cubic metres, the cost is $2.26.
The tiered system applies to residential water users only.