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Development Cost Charges
Development Cost Charges
Introduction to Development Cost Charges (DCCs)
Urban expansion and development often lead directly to an increase in the demand for sewer, water, drainage, parks and roads.
Development cost charges (DCC's) are monies that municipalities and regional districts collect from land developers to offset that portion of the costs related to these services that are incurred as a direct result of this new development. The demand created does not always relate to works that are located adjacent to the property being developed. For example, new development may require a local government to increase the size of its water storage reservoir. Developers pay DCCs instead of the existing taxpayers who are not creating the demand and are not benefiting from the new infrastructure.
Using DCCs, local government can apply a common set of rules and charges to all development within a community. DCCs are applied as one-time charges against residential, commercial, industrial and institutional developments. They are usually collected from developers at the time of subdivision approval or at the time of issuing a building permit.
Part 26, Division 10 of the Local Government Act sets out the general requirements under which local governments may charge DCCs.
DCCs may be imposed on most, but not all, residential and commercial development. However, buildings for public worship, development subject to a land use contract and buildings under $50,000 are specifically excluded from DCC charges. Services such as: childcare, fire and police protection, libraries, recreation are also generally exempt from DCC charges.
The Application of DCCs (Physical Area)
DCCs can be specified according to different zones or specified areas as they relate to different classes and amount of development, but charges should be similar for all developments that impose similar capital cost burdens on a local government. For example, DCCs for road costs may be charged at the same rate across the municipality, while DCCs for sewer costs may be charged based on a development's specific location.
DCCs must be kept in a separate fund from a local government's general operating fund. A local government may only spend DCC monies, and the interest earned on them, for the specific projects and services for which they were originally collected. For example, DCCs collected for sewer infrastructure in a new development may only be spent on this development's new sewer system.
Generally, infrastructure construction begins after enough DCCs have been collected by the local government for the project; however, in certain circumstances construction must begin before enough funds have been collected. In these circumstances either the local government or the developer will "front-end" the cost. These costs are then recovered through DCCs as the development progresses. If either the local government or the developer borrows funds to pay these costs the interest paid on these borrowed monies can be recovered through future DCCs.