High density leads to low revenues

Penticton Herald Staff Monday, February 23, 2009

Penticton city council once eyed its new density bonus levy as a valuable new source of revenue.
Two years after its introduction, the reserve account remains practically empty with an essential balance of less than $22,000. Still, council is considering a proposal to divide the proceeds between affordable housing initiatives and new public amenities. Density bonusing, introduced in 2007, offers local developers an opportunity to add more units than zoning regulations allow, in exchange for funding to address specific city needs. Developers must pay the city $15 for every square foot over a prescribed 2.0 floor area ratio (the floor area of the building relative to the size of the property). "With the higher densities now being proposed in Penticton, it appeared to be a reasonable opportunity have the city take advantage of some of the increased density," said Donna Butler, the city’s special planning projects manager.

As of December 2008, the fund included $21,935 for one new development at 240 Wade Ave. West. The developers of The Alysen highrise project near Skaha Lake Road and Guelph Avenue had also contributed $229,000 but have since applied for a refund after putting the second and third phases of the project on hold. bButler said city staff recommends half the funds be earmarked for affordable housing initiatives and half go towards enhancing public amenities downtown or in the new "urban villages" proposed under the official community plan. Council voted 4-2 to refer the proposal to its development services advisory committee and fiscal review board for comment. Councillors John Vassilaki and Mike Pearce were opposed. Pearce said he is opposed to density bonus fees, which he sees as another level of taxation. Vassilaki said while he supports "reasonably priced housing," he’d like to the see the public amenity funds divided among various other projects.

Coun. Dan Albas said density bonusing is a significant, complex issue which needs further input. He noted the local housing coalition had voiced some concerns about how the density bonus funds were being handled by the city. "We opened up a bank account, but we didn’t have a policy (for those funds)," Albas said.