Ottawa’s Porsche dealership debacle shows there’s a better way to incentivize desirable urban developments

“The city should encourage investment in our communities,” writes Architects DCA president Toon Dreessen. 

It is easy to lambaste the city council for approving a $2.9 million tax break to a luxury car dealership in one of Ottawa’s poorest communities.  

Awarded through a program aimed at incentivizing development in target areas including Vanier, the move appears to be at odds with Ottawa’s aspiration to be a leader in fighting climate change.

It also exposes the challenges of this one-size-fits-all policy and the expected relationship between the development industry, the city, and the community. This is a relationship that needs to be renewed. 

This particular site has been a car dealership for decades. And there is little or no reason for Ottawa to oppose or prevent the dealership from being built. It is, however, concerning that a grant is being provided while we’re experiencing a housing crisis, cuts to transit service and holes in our social safety net affecting Ottawa’s most vulnerable residents.

But this issue centres around a legitimate business making an investment in the community and opting to take advantage of a tax incentive program.

This is a policy with good intentions and, as the public has stated, poor application. 

Encouraging urban renewal

On the surface, the objectives of the Montreal Road Community Improvement Plan are laudable. If a landowner chooses to develop (or redevelop) their property, an incentive can be provided by the city to encourage this investment through a so-called tax increment equivalent grant for up to $5 million, or 50 percent of the redevelopment cost where the tax increase is more than $50,000.

The city has listed a number of business types that are excluded from the program. These include bingo parlours, video arcades (do those even exist anymore?), adult novelty stores and body rub parlours – likely an attempt to “clean up” Vanier – among others.

These are legitimate businesses, even if not to the City of Ottawa staff’s personal taste.

Excluding warehouses and wholesale operations was also easy since this sort of use needs large swaths of land, surface parking for trucks and easy access to highways, none of which are available in Vanier.

In short, most of the list of exclusions is either dubious in real social value or was unlikely to happen anyway.

Car dealerships could have easily been added to this list of excluded businesses.

The text that supports this program seeks to have new developments that “encourage urban renewal, promote the development of cultural assets, support businesses (and) contribute to making the city an attractive and business-friendly environment.”

All of this is commendable. The public disagrees that a car dealership meets these aims, and the outcry is, for now, the way in which they can hold staff and council accountable.

Incentivizing desirable development

The city needs to encourage the type of development we want to see. That includes: 

• Faster planning approval. As-of-right applications should be approved within two months, rather than the current eight or more. According to the 2018 OAA Site Plan Report, every month of planning delay in a representative 100-unit apartment building adds $20,000 per unit per month of delay to the cost of housing. That cost is passed on to buyers and renters, and the delays do little or nothing to add to the quality of the building. 
• Deferring development charges. It can cost a small infill development upwards of $2 million to get through planning applications and pay development charges and security deposits before a shovel hits the ground. Deferring the bulk of this – the development charges – until occupancy frees up capital that a developer can use to kickstart their project. That cash flow can make or break smaller developments.
• Extend that deferral for specific businesses or property uses. This could be small grocery stores, affordable housing or other key services that a community needs to be successful and inclusive.
• Tie deferral periods to sustainable design. Net-zero energy or zero-carbon buildings – which will help the city achieve its climate crisis goals – need greater capital upfront. The less sustainable the building, the sooner the development charges have to be paid. 

All these incentives are policy choices that the city can make today and don’t need to be targeted to a specific community or area.

Any one of these deferrals is simply a line item in the city accounts and costs the city nothing, other than paperwork. There is no fear of default since, if unpaid, the city can levy the costs against property taxes.

We need a reset on the sort of policies we create. Good governance is what council steers and staff rows. We need to tell our elected officials that we want better policies that reflect the city we aspire to.

We need to incentivize the development we do want, encourage investment in our communities and hold staff, and council, to account for well-meaning ideas that fail on execution.

Toon Dreessen is president of Ottawa-based Architects DCA and past-president of the Ontario Association of Architects. For a sample of our projects, check out our portfolio here. Follow us @ArchitectsDCA on Twitter, Facebook, LinkedIn and Instagram.