Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 263

As a follow-up to last week's post about giving free land to the City of Toronto, I am now thrilled to report that, today at 12:14 PM, we received our building permit!

Some of you were keen to hear about what happened following the post. So here's the update. I published the original post last Wednesday. And to be honest, it received far more attention than I was expecting.

On Thursday morning I received a call from the city. They weren't thrilled about my post, but were very helpful and said that they would ensure the conveyance happened immediately. It then got done before noon that same day.

Planning then sent a note to buildings saying that the permit was ready for issuance. Yay. Buildings acknowledged that they were working on it, and on Monday of this week we received a summary of the outstanding fees and the instructions for the wire transfer.

We paid the fees immediately and on Tuesday we received a payment receipt from the city. Then today -- Wednesday -- we received the building permit. So it was exactly one week from post to permit. A big thanks to everyone who helped to finally move this forward.

Hopefully it's clear that last week's post came strictly from a place of prolonged frustration. I wasn't trying to be mean. Our lawyer reminded me, after the post, that we've actually been working on this land conveyance for over 2 years.

Construction is risky. For example, last month a tree fell on top of Parkview Mountain House . The tree was located upgradient from the house and, it was so big, that pieces of it actually landed across the street on our neighbor's property.

Thankfully, it didn't cause as much damage as it could have. It punctured the roof in a few places, but magically, the bay window that it landed on was perfectly fine. We also opened up the drywall around the window to inspect all of the structure.

Needless to say, we didn't have a line item in our budget for "trees that might fall on the house during construction." We also didn't have a line item to take down more trees behind the house, which is exactly what we decided to do after this happened. We called an arborist and asked them to fall anything that looked even remotely questionable. That ended up being 4 more trees.

We were not expecting this.

But this is why budgets have something called a construction contingency (although, we still have enough savings from some of our other contracts not to have to use it). In the end, we also learned something. If a tree falls in a forest and no one is around to hear it, the answer is -- yes -- it can still cost you a lot of money.

Development charges are a topic that is near and dear to this blog.

In theory, development charges are supposed to be "growth paying for growth." In other words, they are intended to pay for the incremental services and infrastructure required strictly because of new development. This, of course, sounds right. More people will equal more demand on city services.

However, development charges also increase the cost of new homes and there is a growing concern that development charges now pay for more than they should. Meaning, they have become a "housing tax", which is more or less the opposite of what you want if you think there's a shortage of new homes.

Frances Bula recently wrote about this in the Globe and Mail .

Part of the challenge, I think, is that city budgets are complicated. As far as I know, it's largely impossible for the average person to try and figure out which municipal costs are associated with growth and which are associated with ongoing operations (i.e. they should be paid for through things like property taxes).

That said, I think this current market environment could create a bit of a litmus test for development charges. As most of you know , new home sales in Toronto have fallen to levels not seen since the global financial crisis and the early 90s.

This means that construction activity has now also fallen and that, in turn, fewer developers are paying development charges. I haven't seen the exact numbers, but intuitively the drop in development charges paid should be precipitous.

Now, if these charges are strictly paying for growth, then in theory, cities should be completely agnostic to this decline. Sure, they're collecting less revenue, but they also don't have the new growth. Any growth that is still in the pipeline (i.e. under construction) would have already paid for their impacts.

However, if this is not the case, and municipal budgets start getting negatively impacted by this drop in development charge revenue, then it suggests that one of two things could be going on.

Either development charges aren't enough to cover the true cost of growth and the whole thing is a bit of a Ponzi scheme. That is, we need a constant flow of new developments to pay for the shortfalls of the last. Or, we're overtaxing new homebuyers for the benefit of incumbent ratepayers.

I'm sure it's more complicated than I'm making it seem right now. But this is the crux of this debate: Are we equitably levying development charges on new homes? This current market could offer a clue. If cities start running out of money, it might suggest the answer is no.