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Calgary repays $56M in misallocated income from city developer levy accounts

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The City of Calgary has repaid more than $56 million in investment income accrued over 13 years by city developer off-site levy accounts.

For those 13 years, investment income from off-site levy funds was put into general revenue, according to the City of Calgary. If there was an operating surplus, the additional money was put into reserve.

The total repaid, with compound interest, came to $56.3 million.  It was directed back into the off-site levy accounts from city reserves.  

The City of Calgary collects off-site levies from developers to pay for services built into new communities (water, sewer, future community infrastructure). The monies contributed by the Calgary developers are kept in off-site levy accounts until they’re used to fund the requisite infrastructure.

The issue was first raised in July of this year. BILD Calgary representatives asked the city why the Community Services Off-site Levy didn’t earn income prior to being put into the 2019 off site levy bylaw.   

Prior to the current Calgary Off-site Levy Bylaw, the Community Services (CS) levy was voluntary, “and the terms and conditions didn’t specify attribution of income,” read city documents.

A working group reviewed the CS levy history of investment income earned. The city also reviewed the other levy programs. Similar problems occurred with the stormwater levy and the Centre City levy.  

The Community Services levy would have earned $47.6 million in that time. For stormwater levies that amounted to $8.036 million. The Centre City levy amount earned was $700,000.

“We know this decision is the right thing to do,” said Stuart Dalgleish, GM for Planning and Development at the City of Calgary.

“There is now a consistent approach in place, there is no impact on services or property taxes, these funds will help fund community service amenities for citizens, and we’re in a better position to be accountable stewards of development levy funds.”

Taxpayer impact?

The city said funds were transferred from a contingency fund for unexpected events. They said it won’t impact funding to other services or have an impact on taxes.

We pressed a little further on that, since the funds had previously been directed to general revenue. While today the replacement cost wouldn’t impact Calgary taxpayers (fiscal reserve), the average investment income accrued – and put into general revenue – is $4.2 million.

We asked how that removal of that money from general revenue would be accounted for in the current mid-cycle budget adjustment.

The city said investment income is one of several income streams. Because it fluctuates from year to year, projections are generally conservative, they said.

They will adjust these estimates moving forward, with no adjustments recommended in the mid-cycle budget.

The city said that $90 million in budget reductions had been found for the 2021 budget. That’s helped provide for a roughly $1.50 per month drop in the typical Calgary single-family homeowner’s monthly tax bill.

Developers appreciate the transparency

BILD Calgary, the advocate for the city’s development industry, said while they were initially disappointed by the events, they’re pleased with the city’s response.

“The City has assured our industry members that their priority is to effectively and transparently manage the off-site levy accounts, which pay for Calgary’s growth,” said Brian Hahn, BILD Calgary CEO.

“We will continue to work with them to identify any other gaps in procedure that may affect these levy funds moving forward.”

Hahn said they’ve been told that the city’s internal and external auditor are being made aware of the situation.

Dalgleish confirmed the external auditor’s involvement.

“We’ll continue working with stakeholders to make our processes transparent and accountable,” he said.

“There’s now increased oversight and improved procedural mechanisms to ensure this issue doesn’t happen again, and we’re engaging our external auditor to review the decision.”

In two weeks (Dec. 1), city administration will report back to the Priorities and Finance committee with a follow-up.