Development projects that are constructed in phases may still be considered to be part of a single site for the purposes of calculating the park levy that is owed, an Ontario Superior Court judge has found.
Justice Paul Perell ruled in favour of the City of Toronto in a park levy dispute over more than $400,000 connected to a residential development in a northeastern section of the city.
“The circumstance that a fact-based determination is required to determine what is a ‘development site’ does not make the Park Levy By-law ambiguous, and the fact-based determination of what is a development site does not entail that there is more than one meaning of development site to choose from,” wrote Perell in Gemterra Developments Corporation v. Toronto (City). “Development site means the place where development occurs, which will be readily apparent in most cases, although where development is staged in phases, it may be necessary to make a factual determination whether the development is to occur at two separate or distinct places or sites.”
The Superior Court decision involves an area of municipal law where there is a sharp rise in disputes between developers and municipalities, especially in the Greater Toronto Area, because of rising land values.
“The dollar amounts are huge,” says Brendan O’Callaghan, a senior lawyer in the legal services branch of the City of Toronto, who was lead counsel in the Gemterra case.
He estimates that there is currently about $60 million in park levy funds that are the subject of appeals by developers in Toronto, primarily before the Ontario Municipal Board.
The provincial Planning Act permits municipalities to require developers to convey a portion of lands for parks or, in the alternative, to pay funds known as a park levy. In Toronto, the levy is 10 per cent of the appraised value for properties up to one hectare in size.
If the site is between one and five hectares, the levy is 15 per cent of the appraised value.
Gemterra received approval to build highrise apartment buildings and townhouses on a 1.3-hectare site, which it was developing in two phases and with two building permits. The company maintained that its levy should be 10 per cent of the value of each phase, while the city argued that the 15-per-cent rate was correct, because the site as a whole was more than one hectare. The city’s position required Gemterra to pay $408,000 more than it owed, the company claimed.
Justice Perell sided with the city and explained that when a development occurs in phases a “fact-based determination” is what must take place to decide on the appropriate rate of the park levy.
“In the case at bar, the factual background establishes that the location for Gemterra’s construction project was a 1.3-hectare parcel of land that was to be developed in two phases but the phases did not demarcate two development sites. The fact that separate building permits were obtained did not demarcate two development sites,” the judge wrote.
If the company had sold off part of the land to another party, for a future development, that might have changed the interpretation of which park levy rate should be imposed, noted Perell.
“This, scenario, is not what occurred in the immediate case, and, in my opinion, it was appropriate for the City to regard Gemterra’s two-phased project as the development of a site larger than 1.0 hectare in size,” he stated.
Mark Flowers, lead counsel for Gemterra in the Superior Court matter, did not respond to a request for comment from Law Times. The city and the company have reached a confidential settlement since the ruling was issued, explains O’Callaghan.
The decision, though, is significant for the city, he says.
The circumstances would be different if the court ruled another way.
“You would never see a development application for more than one hectare of land. The financial motivation would be great [to phase in a development],” says O’Callaghan.
The purpose of the levy is to be able to provide more park land within the city, he explains.
“We always push to get land instead of cash. But if [park space] is too small, it is a challenge,” he states. Jason Park, who frequently acts for developers in park levy disputes, says the issues in the Gemterra case were slightly different because it related to interpreting the size of a development rather than its assessed value. Most of the disagreements that end up at the Ontario Municipal board are over the assessment, he states.
“Developers agree that park land is important. But at the end of the day, the valuation has to be fair,” says Park, a partner at Devine Park LLP in Toronto.
“I think the process could be more transparent,” he adds.
In Toronto, for example, a developer receives a two-page letter initially, stating what the city believes the land valuation to be and the park levy that is owed, Park notes.
“A lot of developers are being asked to make payments not really knowing why,” he says.
While in most instances developers reach a settlement with a municipality, he says, it is only if the decision is appealed that more data is provided.
As well, the land valuations submitted by a municipality could be millions of dollars more than what the developer’s expert believes to be the correct amount, Park says.
“It is not an exact science. You will never find a comparable that is exactly on point,” he says.
Meanwhile, the Ontario Court of Appeal is scheduled to hear a significant park levy-related case in the coming weeks in a dispute between a developer and a Toronto-area municipality.
Elginbay Corporation is appealing a Divisional Court ruling last fall that upheld a Town of Richmond Hill bylaw that sets out the amount of park land that it can require developers to provide.
The law is aimed at ensuring there is enough green space at a time when there is a boom in condominium construction in the municipality. A number of neighbouring municipalities joined as interveners in support of Richmond Hill at the Divisional Court.
In its decision, the three-judge panel found that the Ontario Municipal Board had overstepped its powers in imposing a cap on the amount of park land that Richmond Hill could require from developers, through its powers in s. 42 of the provincial Planning Act.
“The other issue is that the OMB expressed some concern that, if the maximum rate under s. 42(3) was applied by the Town, it would operate as a disincentive to high-density residential development. That concern is a legitimate one for the OMB to consider given its role in the overall process, especially ensuring that municipal policies do not conflict with Provincial policies.
However, no matter how legitimate that concern may be, it does not operate to alter the plain wording of the statute, nor does it serve to provide authority to the OMB to impose conditions where that authority cannot otherwise be found in the plain wording of the statute,” the Divisional Court stated in its decision.