Report to/Rapport au :
Finance and Economic Development Committee
Comité des finances et du développement économique
and Council / et au Conseil
29 March 2011 / le 29 mars 2011
Submitted by/Soumis par : Nancy Schepers, Deputy City Manager/Directrice municipale adjointe, Infrastructure Services and Community Sustainability/Services d’infrastructure et Viabilité des collectivités
Contact Person/Personne ressource : Johanne Levesque, Director/Directrice, Community Sustainability Department/Service de la viabilité des collectivités
(613) 580-2424 x 12257 Johanne.Levesque@Ottawa.ca
REPORT RECOMMENDATIONS
That Finance and Economic Development Committee recommend Council:
1. Approve the Brownfields Rehabilitation Grant Application submitted by Tega Developments Incorporated, owner of the property at 435 Gladstone Avenue and 62 Florence Street, for a Brownfields Rehabilitation Grant not to exceed $503,800, payable to Tega Developments Incorporated, over a maximum of 10 years, subject to the establishment of, and in accordance with, the terms and conditions of the Brownfields Rehabilitation Grant Agreement; and
2. Delegate the authority to staff to execute a Brownfields Rehabilitation Grant Agreement with Tega Developments Incorporated, establishing the terms and conditions governing the payment of the Brownfields Rehabilitation Grant, for, and redevelopment of, 435 Gladstone Avenue and 62 Florence Street, satisfactory to the Deputy City Manager, Infrastructure Services and Community Sustainability, the City Clerk and Solicitor and the City Treasurer.
RECOMMANDATION DU RAPPORT
Que le Comité des finances et du développement économique recommande que le Conseil :
1. Approuve la demande de subvention pour la remise en valeur des friches industrielles présentée par Tega Developments Incorporated, propriétaire du 435, avenue Gladstone et du 62, rue Florence, en vue d’une subvention pour la remise en valeur des friches industrielles d’au plus 503 800 $, payable à l’entreprise pendant au plus dix ans, sous réserve de l’adoption des modalités de cette demande de subvention et conformément à celles‑ci;
2. Délègue au personnel le pouvoir d’exécuter une entente de subvention avec Tega Developments Incorporated pour la remise en valeur des friches industrielles, dans laquelle seront stipulées les modalités du versement d’une subvention pour la remise en valeur des friches industrielles, en vue du réaménagement du 435, avenue Gladstone et du 62, rue Florence, à la satisfaction de la directrice municipale adjointe, Services d'infrastructure et Viabilité des collectivités, du greffier et chef du contentieux et de la trésorière municipal.
BACKGROUND
Brownfields are properties where past actions have resulted in actual or perceived environmental contamination and/or derelict or deteriorated buildings. They may be vacant, abandoned or underutilized. They are usually, but not exclusively, former industrial or commercial properties.
The Brownfields Redevelopment Community Improvement Plan (BRCIP) was adopted by Council on April 27, 2007 and amended by Council on May 12, 2010.
The BRCIP presents the rationale behind the redevelopment of brownfields in Ottawa, and the actions and strategies that will promote brownfield redevelopment. The BRCIP contains a comprehensive framework of incentive programs including the Brownfields Rehabilitation Grant Program.
Tega Developments Inc. has filed an application for a Brownfields Rehabilitation Grant for the demolition, clean-up and redevelopment of 435 Gladstone Avenue and 62 Florence Street, a 2,451-square metre, “L” shaped property with frontages on Kent Street, Gladstone Avenue and Florence Street (see Documents 1, 2 and 3). It is known municipally as 435 Gladstone. The site is presently used for commercial purposes and is almost entirely covered by buildings and asphalt surface. There is a one-storey automotive repair garage (246 square metres) including a fuel dispensing outlet that occupies the south portion of the property abutting Gladstone Avenue and the north end of the property has a trailer and parking lot that is used for the sale and leasing of automobiles. The property has been purchased for redevelopment.
The Phase I and II Environmental Site Assessments prepared by Paterson Group Inc. in 2010 identified a number of environmental impacts from petroleum-based products under the property, likely stemming from the long-term use of the property as a retail fuel outlet (from underground fuel storage tanks) and as an automotive repair garage. Paterson Group Inc. also prepared a site remediation plan. The area impacted by hydrocarbon impacted soils and groundwater encompasses a large portion of the property. This contamination may also be beneath the existing garage, based on the presence of an in-ground hoist and two oil water separators.
The soil and groundwater analytical test results are in excess of the applicable Ministry of the Environment (MOE) site standards for residential development. The recommendations of the Paterson report state that the contaminated soil and groundwater must be removed from the site during redevelopment, after the building is demolished.
The site qualifies as an eligible "brownfield" under the City's Brownfields CIP.
The purpose of this report is to bring the Rehabilitation Grant application for 435 Gladstone and 62 Florence Street before Committee and Council for approval.
DISCUSSION
The Rehabilitation Grant Program is a tax-increment based grant funded through the tax increase that results from redevelopment of the property. The tax-increment grant is not paid in advance but is directly tied to amount of development actually completed on the property. If the development does not proceed then no grants are paid.
Grants will equal 50 per cent of the City portion of the increase in property taxes that results from the redevelopment, payable annually for up to 10 years, or up to the time when the total grant payments equal the total eligible costs, whichever comes first. The City will only pay the annual grant after property taxes have been paid in full each year.
The Building Permit Fee Grant Program provides an additional incentive in the form of a grant equivalent to 30 per cent of building permit fees paid on a project that has been approved for a Rehabilitation Grant. This grant is paid as a component of the Rehabilitation Grant.
The Tega Developments Grant Application
The required documents that are to be submitted to the City as part of a Rehabilitation Grant application are described in Document 4. Staff reviewed the submissions and deemed the application to be complete as of August 4, 2010.
Proposed Remediation
All hydrocarbon impacted soil will be excavated from the site for off-site disposal at a Ministry of the Environment licensed landfill facility. Paterson Group Inc., estimates that 3,500 cubic metres (approximately 7,000 tonnes) of contaminated soil will be removed from the site and transferred to an MOE approved waste facility. Approximately 40,000 litres of hydrocarbon-impacted groundwater would be pumped during the excavation program. An MOE licensed pumping contractor will pump any groundwater for off-site disposal.
Any potentially hazardous building materials (such as asbestos and lead) would be removed and managed as part of the building decommissioning and demolition.
The applicant advised staff in October, 2010 that they would be commencing demolition of the existing garage building and then proceeding with site remediation activities. These activities were undertaken on the full understanding and written acknowledgment by the applicant that under the General Program Requirements, as stated in Section 6.2 (b) of the BRCIP that: “The City is not responsible for any costs incurred by an applicant in relation to any of the programs, including without limitation, costs incurred in anticipation of a grant and/or tax assistance”.
However, while these rehabilitation works have been completed it is important to note that these works are still eligible costs under the provisions of the Brownfields Redevelopment Community Improvement Plan as the works were undertaken after the submission of a completed application. Section 6.6.3. (a), of the Rehabilitation Grant Program requirements states that: “A grant application must be submitted to the City prior to the start of any rehabilitation works to which the grant will apply."
Proposed Redevelopment Scheme
The developer is proposing a low-rise, 121-unit, condominium apartment building for this site, four- and- a- half storeys (14.4 metres) facing Gladstone and three- and- a- half storeys (11 metres) to the north along Kent Street (for elevations, see Document 8).
The project has received site plan control approval by Planning and Growth Management as of February 2011.
Calculating the Rehabilitation Grant
Under the Brownfields Rehabilitation Grant program guide, the applicant is required to submit various technical documents to determine eligibility as well as the costs eligible for the rehabilitation grant. Staff reviewed the submissions and have determined that the total costs eligible for a Brownfields Rehabilitation Grant under the program are $1,007,600.
A breakdown of the eligible costs is shown in Document 5.
The Brownfields Redevelopment Community Improvement Plan specifies that the total eligible costs (Document 5) be capped at 50 per cent of the total costs. Applying this cap results in a final eligible cost for the calculation of the Rehabilitation Grant of $503,800.
Based on the formulas contained within the approved CIP the Rehabilitation Grant is $503,800. The detailed calculations are shown in Document 6.
Grants, paid in the form of property tax rebates, would be capped at 50 per cent of the municipal share of the increase in property taxes that result from the redevelopment, payable annually for up to 10 years; or, up to the time when the total grant payments equal the total eligible costs, whichever comes first. The City will only pay the annual grant after the property taxes have been paid in full each year and all terms and conditions specified in the registered legal agreement between the City and the applicant have been met.
For the purposes of estimating the possible future municipal tax increment and the estimated pay-out period it has been assumed for illustrative purposes that the project would be completed by 2013. The detailed assumptions and the calculations are shown in Document 7.
The program period is a maximum of 10 years from the first payment or until all eligible costs have been paid by the annual grant, whichever comes first. It is possible that the pay-out would occur within five years of the first payment at which time the annual municipal payment would end.
Economic Benefits to the Community
The overall economic impact of the proposed development is estimated at $10 million in direct construction value for the apartment building containing 121 condominium units. During the development of the site, direct and indirect economic benefits to the local economy will be experienced as a result of building demolition, site remediation and the construction period through payroll, purchased material supplies and services and equipment rentals. It is estimated that during the construction period approximately 80 person years of direct employment and 140 person years of indirect employment would be created by the project.
After occupancy, there would be an injection of new goods and services spending in the businesses in the immediate area along Gladstone Avenue, Kent Street and Bank Street.
Over $25 million in new residential assessment would be added to the property tax assessment roll at full development. Staff estimates that nearly $105,000 per year in increased municipal property taxes, net of the Brownfields Rehabilitation Grant and Municipal Leadership Account, can be expected at the completion of the project. Once the Brownfields Rehabilitation Grant is fully paid out, the full tax increment would subsequently go to the City's general revenues, and is estimated at just under $250,000 per year.
The project will earn the City over $125,000 (2010 dollars) in building permit fees and other development fees.
ENVIRONMENTAL IMPLICATIONS
From an environmental perspective, this project exemplifies the principles of sustainable development and addresses the policies of the Environmental Strategy. Its location within an established neighbourhood ensures immediate access to hard and soft services already in place and broadens the base for future support of these services.
The approval of this rehabilitation grant will assist with the redevelopment of this brownfield property and ensure that this contaminated site is properly remediated prior to development. A Record of Site Condition will be required as per the funding agreement. Brownfield redevelopment is identified as a key strategy for promoting reinvestment in existing urban areas and for reducing the need to expand into greenfield sites. The remediation and redevelopment of brownfield sites assists in meeting the 2003 Environmental Strategy’s goal of “clean air, water and earth”.
RURAL IMPLICATIONS
N/A
CONSULTATION
N/A
COMMENTS BY THE WARD COUNCILLOR(S)
The Ward Councillor is aware of this application and the staff recommendations.
LEGAL/RISK MANAGEMENT IMPLICATIONS:
There are no legal/risk management impediments to implementing any of the recommendations in this report.
CITY STRATEGIC PLAN
One of the City’s priorities, as a strategic direction, is planning and growth management. An important objective is to respect the existing urban fabric, neighbourhood form and the limits of existing hard services, so that new growth is integrated seamlessly with established communities (Objective F2). In general, residential intensification assists the City’s overall smart-growth urban management objectives by placing less of an emphasis on the expansion of service boundary (into greenfields) and more of an emphasis on the utilization of existing municipal infrastructure investments. The proposed redevelopment of an automotive service centre and parking lot to a 121 unit low-rise residential building is an excellent example of urban infill that blends seamlessly with the surrounding community. The scale, height and massing of the project ensures that it strengthens and complements the neighbourhood building fabric. The building is clad in beige brick, with stone and pre-cast concrete details. According to the Cultural Heritage Impact Statement, the proposed building’s design was influenced by its context, particularly the former First United Church located to the immediate north, which served as the inspiration for the crenellated parapet and the stone trim. Other influences included the small apartment buildings found in the area.
The location of the development puts it within easy walking distance of shopping and community facilities and recreation. The site is served by two OC Transpo bus routes on Gladstone Avenue. Parking for 61 bicycles is also provided on-site.
In general, encouraging residential intensification of brownfield sites can also have many positive economic, social, and environmental benefits to the surrounding neighbourhood and local economy.
TECHNICAL IMPLICATIONS
N/A
FINANCIAL IMPLICATIONS
As per the Brownfields Redevelopment CIP, if this Rehabilitation Grant application is approved, the City would provide the owner with a grant equivalent to 50 per cent of the increase in municipal taxes. In this case, the total maximum grant is $503,800. The grant payment would be calculated annually and would be paid per year until the total eligible costs are repaid, or a maximum of 10 years, whichever comes first. At that time the City will begin to collect and retain the full municipal portion of the tax increment.
An annual grant of 50 per cent of the tax increment to the applicant leaves the other 50 per cent for the City. During the period of the grant payment, the City will set aside 15 per cent of its share of the tax increment to fund other elements of the Brownfields Redevelopment Strategy. This money will be deposited into the Municipal Leadership Account provided for by the Brownfields Community Improvement Plan. This account would function as a revolving fund to be used to support the Brownfields Redevelopment Strategy. The remainder of the municipal tax increment will be applied to the general City budget. No taxes will be rebated in 2011. As approved components of this project come forward the Revenue Division will review rebated tax calculations.
SUPPORTING DOCUMENTATION
Document 1 Location Map
Document 2 Aerial View
Document 3 Street Views
Document 4 Rehabilitation Grant Application Requirements
Document 5 Rehabilitation Grant-Eligible Costs
Document 6 Calculating the Rehabilitation Grant
Document 7 Estimated Future City Property Tax Increment and Annual Municipal Grant Payable
Document 8 Elevations
DISPOSITION
City Clerk and Solicitor Department, Legal Services to prepare the Brownfields Rehabilitation Grant Agreement.
Community Sustainability Department to notify the applicant of Council’s decision.
AERIAL VIEW DOCUMENT
2
REHABILITATION GRANT APPLICATION REQUIREMENTS DOCUMENT 4
A Brownfields Rehabilitation Grant program guide was prepared as part of the administration of the Brownfields financial incentives program. This program guide provides the detailed requirements to an applicant in order to file a complete application with the City for consideration of financial assistance under this grant program. The applicant is required to submit various technical documents to determine eligibility and costs eligible for the rehabilitation grant. The following documents are required:
- All environmental studies (Phase I ESA, Phase II ESA and Remedial Action Plan);
- Detailed work plan and cost estimate prepared by a qualified person (as defined by the Environmental Protection Act and Ontario Regulation 153/04, as amended), for all eligible environmental remediation and risk assessment/risk management works;
- A cost estimate provided by a bona fide contractor for eligible rehabilitation/redevelopment and demolition costs;
- A set of detailed architectural/design and/or construction drawings; and
- An estimated post-project assessment value prepared by a private sector property tax consultant.
The applicant (registered owner) or agent acting on behalf of the registered owner is required to fully complete the application including all required signatures and complete the sworn declaration.
The costs eligible for a Brownfields Rehabilitation Grant for 435 Gladstone Avenue and 62 Florence Street are estimated as follows:
|
|
Eligible Costs |
Estimated Cost |
|
1 |
Environmental studies |
$22,100 |
|
2 |
Environmental Remediation |
$434,500 |
|
3 |
Monitoring, maintaining and operating environmental and engineering controls/works as specified in the Remedial Work Plan |
$25,000 |
|
4 |
Cost of Project Property Tax Estimate & Feasibility Study |
$5,000 |
|
5 |
30 per cent of the estimated Building Permit Fee to be paid |
$36,000 |
|
6 |
Building and site Demolition |
$485,000 |
|
|
Total Costs Eligible for a Rehabilitation Grant |
From the above, the total costs eligible for a Brownfields Rehabilitation Grant are $1,007,600.[1]
CALCULATING THE REHABILITATION GRANT DOCUMENT 6
The Ottawa Brownfields CIP specifies that, the total of all grants shall not exceed 50 per cent of the cost of rehabilitating said lands and buildings.*
|
1 |
Total eligible Costs- from Document 5 |
$1,007,600 |
|
2 |
Total capping at 50 per cent of line 1 |
$503,800 |
|
3 |
Total Rehabilitation Grant Payable |
* The site is located at 435 Gladstone Avenue. The location is designated “Traditional Mainstreet” in the City of Ottawa Official Plan. This location would qualify as being in the priority area under the Brownfields CIP and therefore is eligible for a grant equivalent to 50 per cent of the municipal property tax increase that results from the redevelopment, payable annually for up to 10 years, or until the time when the total grant payments equal the total eligible costs whichever comes first.
The total Rehabilitation Grant payable is $503,800 (line 3 above).
ESTIMATED FUTURE CITY PROPERTY TAX INCREMENT AND
ANNUAL MUNICIPAL GRANT PAYABLE DOCUMENT 7
Pre-Project Property Tax Rates and Property Taxes
Current Value Assessment on the property at 435 Gladstone and 62 Florence Street is $749,000, classed as Commercial (CT). Current (2010) property taxes are approximately $26,200 broken down as follows:
Table 1
|
Municipal Property Tax portion |
$14,509 |
|
Education Property Tax Portion |
$11,691 |
Total Pre-Project Property Taxes |
$26,200 |
Based on a post-project assessment valuation prepared by PricewaterhouseCoopers LLP, as submitted as part of the application, and modified by staff to reflect a likely phase-in of assessment values, it is estimated that once the entire project is complete, the proposed 121-unit residential condominium complex could have a post-project assessment value in excess of $25,713,000 (2010$)[2].
For the purposes of estimating a future municipal tax increment and the estimated pay-out period it has been assumed for illustrative purposes that the project would be completed by 2013.
It is important to note that the tax increment is only an estimate and provides guidance on the order of magnitude of the possible payment under the assumption that the project would be completed, reassessed and taxes levied and paid in this period. The tax rates and all of the assessment valuation parameters are held constant for illustration purposes. In practice the assessed value would likely increase reflecting increasing property values. As well, there would likely be some increase in the annual municipal levy during the projection period.
The administration of the grant program would require that any grants to be paid be based on actual Municipal Property Assessment Corporation (MPAC) property assessment (including any resolution of appeals) of improved properties. The prevailing tax rate would be applied and only after taxes are paid in full for one year and only when the City is satisfied that all terms and conditions have been met as specified in the legal agreement between the City and the applicant would a tax rebate be issued. This rebate would be capped at 50 per cent of the municipal share of the increase in property taxes over the pre-project municipal property taxes paid.
The program period is a maximum of 10 years from the first payment or until all eligible costs have been paid by the annual grant, whichever comes first.
Estimated Annual Post-Project Municipal Property Taxes
|
Tax Class*
|
Estimated assessment |
Estimated Municipal Tax |
|
121apartments |
$25,713,000 |
$260,557 |
* Tax Class Residential (NT)
Estimated future Municipal Tax Increment = Estimated future municipal tax minus pre-project municipal share of taxes (2010). That is $260,557 (from Table 2) - $14,509 (from Table 1) = $246,048.
Once the future municipal tax increment has been determined based on the 50 per cent grant factor (as set by Council in the CIP) the annual grant could be $123,024. The possible payment schedule is shown in the following table.
In the administration of this grant each row would be calculated every year based on the new assessment, tax rate, taxes paid and actual municipal tax increment to establish the actual grant payment. It is possible that the pay-out would occur within five years of the first payment at which time the annual municipal payment would end.
Table 3 Estimated Municipal Property Tax Changes
|
Year |
Tax before rehabilitation |
Tax after rehabilitation |
Tax increment |
Grant to applicant |
To City |
||
|
Of which to BMLA* |
Of which to general revenue |
TOTAL Increment to City |
|||||
|
1 |
$14,509 |
$260,557 |
$246,048 |
$123,024 |
$18,454 |
$104,571 |
$123,024 |
|
2 |
$14,509 |
$260,557 |
$246,048 |
$123,024 |
$18,454 |
$104,571 |
$123,024 |
|
3 |
$14,509 |
$260,557 |
$246,048 |
$123,024 |
$18,454 |
$104,571 |
$123,024 |
|
4 |
$14,509 |
$260,557 |
$246,048 |
$123,024 |
$18,454 |
$104,571 |
$123,024 |
|
5 |
$14,509 |
$260,557 |
$246,048 |
$11,703 |
$35,152 |
$199,194 |
$234,345 |
|
6 |
$14,509 |
$260,557 |
$246,048 |
$0 |
$0 |
$246,048 |
$246,048 |
|
7 |
$14,509 |
$260,557 |
$246,048 |
$0 |
$0 |
$246,048 |
$246,048 |
|
8 |
$14,509 |
$260,557 |
$246,048 |
$0 |
$0 |
$246,048 |
$246,048 |
|
9 |
$14,509 |
$260,557 |
$246,048 |
$0 |
$0 |
$246,048 |
$246,048 |
|
10 |
$14,509 |
$260,557 |
$246,048 |
$0 |
$0 |
$246,048 |
$246,048 |
|
TOTAL |
$145,085 |
$2,605,570 |
$2,460,485 |
$503,800 |
$108,966 |
$1,847,719 |
$1,956,685 |
|
* Brownfields Municipal Leadership Account (revolving fund) |
|||||||
|
New municipal property tax portion (tax increment) for years one through 10 |
|
|
Rehabilitation Grant value for years one through payout period (5 years) |
|
|
Contribution to BMLA based on tax increment for years one through payout period (5 years) |
$108,966 |
|
Net new taxes to municipal general revenue for years one through 10 |
$1,847,719 |
