Bruce Walkinshaw - Penticton Western News Published: July 13, 2010 6:00 PM
Penticton council continued to tweak its headstone economic policy last week, voting 6-1 to have staff draft new bylaws to make it less financially burdensome for businesses to help rejuvenate the economy. Effective for five years, the economic incentive zones program reduces and delays city taxes and fees in an attempt to stimulate new construction or renovations in targeted areas of the city, as well as green projects. The program includes a 50 per cent reduction in building permit fees and development cost charges or DCCs — money charged by the city to offset a higher demand on city services and infrastructure due to new development. Originally, the program was structured so that the approved businesses or developers paid 100 per cent of the DCCs up front and then applied to get 50 per cent of the money back once the project reached completion. “To have someone put up 100 per cent of costs of the DCCs right up front and then pursue them later, (seems) rather punitive,” said Coun. Dan Albas. “Basically it reduces (the applicants’) ability to finance projects because the bank will pull back (their) line of credit accordingly.” With the change, successful applicants will only have to pay 50 per cent of the DCCs up front, but with a covenant on the property so that if the project is either not completed or completed in a manner contrary to the agreed-upon design, the city will still have an avenue to acquire the money by taking actions such as not issuing an occupancy permit or not turning on access to water or sewage.
However, not everyone at the city thinks the move is a good idea. Coun. Garry Litke voted against it and director of development and engineering Mitch Moroziuk reported that the city’s lawyers, Young Anderson, found several “pitfalls with the covenant approach.” The foremost identified risk is that a developer might have already sold the property to an unaware resident by the time the city decides to go after the DCC money. Not issuing an occupancy permit, said Young Anderson, could impact the wrong party, perhaps, in the case of a residential development, leaving the owner(s) with nowhere to live. And, if an owner decided to occupy the property without an occupancy permit, reported Moroziuk, “The city would then have to use the court process to have them vacate. This would be costly and time consuming.” But Albas said that the vast majority of people who obtain or sell real estate use a lawyer or notary public who would be able to explain the ramifications of a covenant. Plus, he said, most mortgage companies and insurance companies would also require occupancy permits to be issued before approving any deals. “It is actually more of an incentive to a developer because now not only would they just pay the 50 per cent, but they would then secure the purchase by a new occupant in order for the mortgage companies to give those funds,” said Albas.
Coun. Mike Pearce, a real estate lawyer, said that he thought the system would work. “There is also a disclosure statement even on new projects that is required by law when you develop five lots or more and therein you must have all the potential covenants listed or sited before a person enters a pre-purchase contract,” he said.
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