Nearly all industrial development in Edmonton is facilitated through a system of development levies; Arterial Roadway Assessments and Permanent Area Contributions, which spread the cost of major infrastructure among benefiting landowners.
Typically, early developers in an area must construct oversized infrastructure to accommodate the future development of the entire area.
These front-end developers can recover their additional costs (over-expenditures) through development levies (Arterial Roadway Assessments and Permanent Area Contributions) paid by subsequent developers, as other benefiting lands are developed.
However, due to the characteristics of industrial development, recovery of over-expenditure costs can be unpredictable and uncertain, which can drastically reduce the feasibility of many projects. It could take years, or even decades before the front-end developer receives full reimbursement.
In addition, subsequent developers can be significantly burdened by the requirement to pay development levies and over-expenditures that they have not budgeted for.
The Industrial Infrastructure Cost Sharing Program, which is a hybrid between development levy and tax increment financing, helps to address these issues.
Cost Sharing Details
When a front-end developer is required to construct oversized infrastructure, they will be entitled to recover their over-expenditure costs from up to 50% of the City’s new annual yearly tax revenue, which is the difference between the pre-development and post-development tax revenue, that directly results from the developer’s construction.
This provides predictable cost recovery for the developer, which in turn, increases financial feasibility. In addition, this encourages land to be developed faster, and to its highest possible value, as higher growth in property assessment and tax revenue will result in faster payback for the developer.
Any funds that the City contributes to a developer’s over-expenditure above 25% of the construction cost will be recovered by the City through future development levies, which limits the City’s risk.
Where the City contributes a portion of its new tax revenue towards oversized infrastructure, the development levies for the area can be reduced by 25% due to the City’s contribution.
This reduces the financial burden on subsequent developers who are required to pay these levies back to front-end developers.
For additional information on the Industrial Infrastructure Cost Sharing Program, please refer to City Policy C592.