In November 2016, the Ontario Municipal Board (the "Board”) issued a decision that reflects a growing trend of disputes concerning development charges in Ontario. The issue in this case turned on whether the municipality acted properly in imposing significant costs on a developer as a condition of approving the development. The Board sided with the developer finding that the municipality had improperly required that the developer pay for road works and a multi-use path as part of obtaining approval for the development, and the municipality has been ordered to pay approximately $4 million to that developer.
In agreeing with the developer, the Board provided important commentary on the statutory provisions that impact development charges, including the Planning Act, the Development Charges Act, and the impact of by-laws enacted pursuant to those Acts. One important aspect of this case is the strict interpretation of holding by-laws, which limit the use a developer can make of a property until certain conditions are met and the holding by-law is lifted. This decision marks the first time the Board has ordered a municipality to comply with the strict wording of a holding by-law.
The ruling also reinforces important principles concerning site plan approvals – by-laws through which a municipality ensures that no development can take place until site plan approval is obtained. The Board reinforced the principle that municipalities cannot use site plans to hold developers accountable for the cost of works that do not stem directly from the proposed development. Municipalities must fund these works using other mechanisms.
This case was brought by several appellants. However, this case comment refers only to the appeal brought by Colonnade Development Inc. (“CDI”). CDI brought an appeal against the enactment of a particular by-law, (the “DC By-law”) and a by-law lifting a holding provision.
The Development Charges Act (“DCA”) sets out the parameters under which municipalities may charge development charges on new development through a development charges by-law.
Section 2(1) of the DCA provides as follows:
(1) The council of a municipality may by by-law impose development charges against lands to pay for increased capital costs required because of increased needs for services arising from development of the area to which the by-law applies.
(5) A development charge by-law may not impose development charges with respect to local services described in clauses 59 (2) (a) and (b).
Section 59 of the DCA reads as follows:
(1) A municipality shall not, by way of a condition or agreement under section 51 or 53 of the Planning Act, impose directly or indirectly a charge related to a development or a requirement to construct a service related development except as allowed in subsection (2).
(2) A condition or agreement referred to in subsection (1) may provide for,
(a) local services, related to a plan of subdivision or within the area to which the plan relates, to be installed or paid for by the owner as a condition of approval under section 51 of the Planning Act;
(b) local services to be installed or paid for by the owner as a condition of approval under section 53 of the Planning Act.
To be valid, a development charges by-law must be supported by a development background charges study (“DCBS”). A development charges by-law must be renewed every five years, and supported by a DCBS. The study sets out the justification for a development charges by-law, and in the case of Ottawa’s DC By-law, included a list of projects which were to be funded by development charges. When a new development charges by-law is passed, it is subject to appeal to the Ontario Municipal Board. The Board found in order for the DC By-law to be upheld, there must be “a connection between the development charge imposed and the DCBS, which supports the ultimate by-law enacted by municipal council.”
When a zoning by-law is passed under section 34 of the Planning Act, council of the local municipality may attach a holding symbol to specify the use to which lands, buildings or structures may be put at some time in the future. The applicable section of the Act, section 36, provides:
36(1) Holding provision by-law
The council of a local municipality may, in a by-law passed under section 34, by the use of the holding symbol "H" (or "h") in conjunction with any use designation, specify the use to which lands, buildings or structures may be put at such time in the future as the holding symbol is removed by amendment to the by-law.
A by-law shall not contain the provisions mentioned in subsection (1) unless there is an official plan in effect in the local municipality that contains provisions relating to the use of the holding symbol mentioned in subsection (1).
Holding symbols may limit the uses for lands, buildings or structures, until the holding provision set forth in the holding by-law is removed. For this reason, developers must seek to have holding symbols removed to enable them to proceed to use the lands. To do this, the developer must bring an application to council for an amendment of the by-law. On these applications, developers must demonstrate that the provisions of the holding by-law are met.
If council refuses an application to remove the holding symbol or fails to make a decision, the applicant has the right to appeal that decision to the Board. Holding by-laws are subject to appeal when passed, when an application to remove the holding provision is refused, or when there is a non-decision on application to remove the holding provision. However, there exists no explicit mechanism to appeal the conditions of the lifting of a holding by-law. For example, in the present case, the conditions for lifting a holding by-law included reliance on a traffic study that the appellant disagreed with.
Notwithstanding the inability to appeal such conditions, in this case, the Board clarified the limits on the City’s authority to refuse an application to remove a holding symbol. More specifically, the Board emphasized that the City cannot unilaterally change the requirements that have been clearly established in the holding by-law; so long as those requirements have been met, the holding symbol must be removed.
Site Plan Control
One way that municipalities control development is through “site plan control,” under s. 41 of the Planning Act. Municipal councils can enact by-laws designating areas as “site plan control areas”, so long as this is consistent with the official plan. Once an area is designated as such, no one can develop in that area unless the council of the municipality or the Board provides approval. Specifically, they must approve one or both of the parameters for plans and drawings set out in s. 41(4).
A municipality with a site plan control by-law has the power to impose conditions on a developer before approving the plans and drawings referred to above. The Act is very specific as to which conditions a municipality may impose. The municipality has the right to impose conditions on the owner listed in section 41(7) of the Act, being to:
(a) provide to the satisfaction of and at no expense to the municipality any or all of the following:
1. Subject to the provisions of subsections (8) and (9), widenings of highways that abut on the land.
2. Subject to the Public Transportation and Highway Improvement Act, facilities to provide access to and from the land such as access ramps and curbings and traffic direction signs.
3. Off-street vehicular loading and parking facilities, either covered or uncovered, access driveways, including driveways for emergency vehicles, and the surfacing of such areas and driveways.
4. Walkways and walkway ramps, including the surfacing thereof, and all other means of pedestrian access.
4.1 Facilities designed to have regard for accessibility for persons with disabilities.
5. Facilities for the lighting, including floodlighting, of the land or of any buildings or structures thereon.
6. Walls, fences, hedges, trees, shrubs or other groundcover or facilities for the landscaping of the lands or the protection of adjoining lands.
7. Vaults, central storage and collection areas and other facilities and enclosures for the storage of garbage and other waste material.
8. Easements conveyed to the municipality for the construction, maintenance or improvement of watercourses, ditches, land drainage works, sanitary sewage facilities and other public utilities of the municipality or local board thereof on the land.
9. Grading or alteration in elevation or contour of the land and provision for the disposal of storm, surface and waste water from the land and from any buildings or structures thereon;
(b) maintain to the satisfaction of the municipality and at the sole risk and expense of the owner any or all of the facilities or works mentioned in paragraphs 2, 3, 4, 5, 6, 7, 8 and 9 of clause (a), including the removal of snow from access ramps and driveways, parking and loading areas and walkways;
(c) enter into one or more agreements with the municipality dealing with and ensuring the provision of any or all of the facilities, works or matters mentioned in clause (a) or (d) and the maintenance thereof as mentioned in clause (b) or with the provision and approval of the plans and drawings referred to in subsection (4).
(c.1) enter into one or more agreements with the municipality ensuring that development proceeds in accordance with the plans and drawings approved under subsection (4);
(d) subject to subsection (9.1), convey part of the land to the municipality to the satisfaction of and at no expense to the municipality for a public transit right of way.
However, the power to impose conditions does not authorize a municipality to require that financial contributions be made for works off-site that are not connected to the development, nor does it authorize conditions about matters unrelated to the immediate access to or requirements of the site.
The CDI Appeal
CDI purchased 15 Colonnade Road (the “CDI Property”) in 2000 for the purpose of developing that property. The CDI Property is located at the western end of Colonnade Road. Subsequently, CDI developed a nearby property on Colonnade Road for a Canada Post facility.
At the eastern end of the street is 81 Colonnade Road, which is owned by affiliates of Ashcroft Homes (the “Ashcroft Property”). The Ashcroft Property was purchased for the purposes of developing a residential subdivision. Ashcroft was not a party to the appeal before the Board, and did not make any submissions, however it was a party to a cost sharing agreement with CDI, and to a subdivision agreement with the City.
The Purchase of the CDI Property
The National Capital Commission (“NCC”) previously owned the properties that became the CDI Property and the Ashcroft Property. In 2000, the NCC had discussions with the then City of Nepean about selling the property, leading the former City of Nepean to adopt Holding By-law No. 105-2000 (the “Holding By-law”).
Before the City of Nepean passed the Holding By-law, it entered into a memorandum of understanding with the NCC. Many of the parameters in the Holding By-law mirrored provisions in the memorandum of understanding. This memorandum of understanding included clarification that the City of Nepean was obliged to provide access for the CDI Property to Colonnade Road and to construct a recreational pathway at its own cost. The recreational pathway was never constructed by the City of Nepean (or subsequently by the City of Ottawa).
The Holding By-law provided that the “H” designation would only be lifted upon the following:
- Submission of a Transportation Impact Study (“TIS”) to the satisfaction and approval of the City;
- An agreement being entered into between the City and the owners of the properties regarding cost sharing and implementation of a schedule for construction of road infrastructure improvements generated by development of the subject property, as recommended by the TIS and approved by the City; and
- The submission and approval of a site plan application to the satisfaction of the City. [emphasis added]
Ashcroft commissioned a TIS in 2005, for the purposes of satisfying the Holding By-law, which recommended a road widening on Merivale Road (which was east of the CDI Property). The study stated that most of the traffic relating to the Ashcroft Property and the surrounding area would be background traffic projected out to 2013. The study recommended a road widening on Merivale Road and Colonnade Road.
In compliance with the Holding By-law, CDI and Ashcroft requested that the City enter into a cost sharing agreement to fund road works to address the potential traffic issues. However, despite the clear wording of the Holding By-law, the City refused to enter into the cost-sharing agreement.
There was evidence before the Board demonstrating that in 2005 the City recognized that the Merivale Road intersection was at capacity, but the City did not have the money to pay for it and required the works to be constructed by Ashcroft as a condition of approval.
In 2014, CDI applied to the City for development approvals and building permits under the Planning Act and Building Code Act in order to construct an automobile dealership.
As a condition of providing approval, the City required CDI to construct various works, including substantial road modifications and multi-use path. The road modifications were divided into two extensive phases on the basis of 2005 TIS commissioned by Ashcroft. CDI contested the requirements for the extensive road modifications and the building of a multi-use path because they were not connected to the development.
The City required CDI to enter into a road modification agreement. CDI was required in Phase 1 to do substantial road modifications to the Colonnade Road North and Merivale Road intersection and Colonnade Road between Merivale Road and 15 Colonnade Road. For Phase 2, the City was requiring CDI to do substantial additional road modifications to:
(a) Colonnade Road between Merivale Road and the Colonnade Road South intersection;
<p style="margin-left:.5in;" aria-"="">(b) Colonnade Road North and Colonnade Road South intersection; and
(c) New signalized intersection from Colonnade Road North to 15 Colonnade Road.
The total cost of these road modifications are in the range of $4,000,000. CDI requested the City to include the road modifications works in the DCBS and the DC By-law. The City did not include the Phase 1 and the Phase 2 Works for development charge recovery in the City of Ottawa 2014 DCBS.
The City took the position that CDI had to fund this work themselves as a condition of receiving the City’s approval for their developments. Ashcroft did not agree to pay for the road widening work. When this happened, the City took the position that CDI had to fund the entire project in order to receive approval for its development. Otherwise, the development would be unable to proceed. The Board viewed the City’s failure to participate in the cost sharing agreement troubling as “this was clearly contemplated and anticipated at the time of the enactment of the holding by-law.”
Under tremendous economic pressure and under protest, CDI entered into various development agreements with the City, which the City stated obliged CDI to construct the Phase 1 and 2 works.
The Board’s Decision
The Holding By-law
Noteworthy in this Board decision is the strict interpretation of the Holding By-law. The Board was “particularly troubled” by the City’s refusal to participate in the cost sharing agreement for the road works at issue as it was clearly contemplated and anticipated at the time of the Holding By-law’s enactment.
The Holding By-law’s conditions stated that the works to be constructed had to be generated by the development. As the Phase 1 and 2 works were not works “generated by the development” they were not properly made a condition of lifting the holding by-law. Weaving the concepts of direct causation for development conditions, and the strict terms of a holding by-law the Board found:
 ... While the Board recognizes and acknowledges that municipalities work under extreme budgetary constraints and are always looking for ways to reduce its financial obligations with respect to the provision of services to its residents, it is nevertheless not fair and reasonable under the DCA to force additional costs onto the backs of individual landowners as part of their developments, particularly where the works required by the City will be of general benefit. The City and in this case, had indicated in the past, that it would share part of the costs. [emphasis added]
This case should alert municipalities as to their obligations under holding by-laws. Though municipalities may face budget constraints, they are expected to follow the conditions set in the holding by-laws that they construct. The Board refused to allow the lifting of the Holding By-law to be used as a “blank cheque”. More importantly, the Board found a way to deal with the absence of an appeal process for holding by-laws in the Planning Act.
Site Plan Approval
The Board in this case also linked its decision to the powers of a municipality under section 41 of the Planning Act.
 The Board also finds that the meaning of “generated by the development” for the purposes of the holding by-law and what a municipality is permitted to require a developer to do at site plan are the same. The traffic engineers agree that the Phase 1 and 2 works are not “generated by the development as required by the holding by-law. Capacity issues on roads are not an owner’s responsibility at the site plan approval stage. [emphasis added]
At the site plan approval stage, pre-existing capacity issues on roads are therefore not an owner’s responsibility. First, the Board discussed how the City had passed off works as a development approval condition that were not directly necessary due to the proposed development. The Board also found that the work, divided into phases as a condition of approval for the development applications, were works that fell within what was contemplated in the project list of the and therefore should have been development charge eligible. The road widening was also within the policies under DCBS.
The Board drew the conclusion that:
 … the Phase 1 and 2 works are off site the property (15 Colonnade Road) and were not included in the project list by the City because it was its intention to make the owner to pay for such works when it applied for site plan approval. Where the municipality lacks the lawful authority to require the works to be carried by the developer as a condition of site plan approval, it should include such works in the DC or pay it out of general revenues. [emphasis added]
The Board ordered that the City pay CDI roughly $4,000,000 out of DC By-law revenues or general revenues.
This case should alert municipalities as to the difference between collecting funds through development charges, and the inability to work around this method by making works not directly linked to the proposed development a condition for approval. Municipalities may not use the site plan approval process to obtain more than what can be provided for in s. 41 of the Planning Act.
Finally, municipalities are granted a breadth of power under the Planning Act. Along with this power, municipalities should be mindful of their obligation to act fairly and reasonably. In this particular case, the Board found:
 Municipalities must always act fairly and reasonably in its administration of legislation under which it has authority. It did not do so in this case when it required CDI to construct and pay for works that related to existing problems on the road system that were its responsibility.