Upfront payment supports new housing developments in Wellington

A developer of two subdivisions in Wellington will pre-pay a portion of development charges under new financing agreements with the municipality.

Development charges are fees collected from developers, typically at the time a building permit is issued. The fees help pay for the cost of growth-related municipal infrastructure.

Under these agreements, developer Kaitlin Corporation, is providing letters of credit amounting to $4 million, signalling its seriousness about proceeding with the development, in exchange for the County reserving water/wastewater capacity for these new housing developments.

“We are excited to be building in Prince Edward County,” says Devon Daniell, Director, Business Development at Kaitlin Corporation. “We respect the importance of connecting into the existing village of Wellington and will be offering a mix of housing options.”

Kaitlin Corporation will also pay all of its development charges upfront at the time they receive final approval of their plan of subdivision, rather than paying at the time when building permits are issued.

“Increasing a mix of housing supply in Prince Edward County is critical to the long-term livability of our community,” said Mayor Steve Ferguson, in a media release. “With these agreements in place, the developers can move forward with greater certainty, and the municipality can ensure that growth pays for growth.”

The municipality is focused on the immediate and short-term water and wastewater infrastructure needs in Wellington. There are a number of infrastructure improvements that need to happen in the next 10-20 years to accommodate the growth that the municipality is projecting based on the applications submitted by developers.

The estimated cost of infrastructure improvements is $68 million, with $52 million to be funded by developers via development charges.

The remaining $16 million is identified as benefiting existing customers and would be debt serviced over a 30-year term. The debt servicing costs would be recovered through these upfront financing agreements, and therefore will not be an addition to the water and wastewater rates. In return, the developers will gain the certainty that they can connect their developments to municipal water and wastewater services when the services are available.

Construction of the housing units is anticipated to begin as early as fall 2022, with construction continuing into 2025.

The County has not pursued upfront financing agreements in the past, but the arrangements are common in other jurisdictions where development activity is high as a way of managing infrastructure requirements. The agreements allow staff to understand projected development and plan ahead for infrastructure upgrades in order to maintain a positive cash flow, rather than the municipality shouldering all the risk for infrastructure investments that may take years to see growth paying for those services.

To mitigate the risk of signing these agreements and their commitments, the municipality is requiring the developer to submit an irrevocable letter of credit as security for the draft approved lands for both developments.