Sarnia council approves full development-charge holiday to chase infrastructure grants

Sarnia city council has approved a complete three-year residential development-charge holiday, potentially extending to five years, after staff applied for the reduction before the policy was publicly debated.

Sarnia city council has approved a complete three-year residential development-charge holiday, while a secondary grant application could extend the reduction to five years.

The July 20 decision approves the reduction proposed in the city’s application to the Canada-Ontario Development Charge Reduction Program, which staff submitted before receiving formal council authorization. It allows amendments to Development Charges By-law 1 of 2024 and the signing of resulting agreements, conditional on the city receiving sufficient grant funding.

Staff submitted the application in June after the program was announced June 1 with a June 19 deadline.

David Jackson, Sarnia’s general manager of engineering and operations, told council the city normally brings grant requests forward before applying whenever possible.

“This program is very unique in the quick timeline that came out and the quick turnaround time for the application,” Jackson said.

Staff believed council’s recent direction on development charges supported an aggressive application. Jackson emphasized that the submission did not bind the city before council approved the proposal and an agreement was signed. Had council rejected the recommendation, the application would have effectively been withdrawn.

The primary application seeks approximately $55 million in grants toward about $75 million in infrastructure projects. Sarnia would contribute roughly $20 million and estimates it would forgo about $21 million in development-charge revenue during the three-year period.

A secondary application could increase the total grant to approximately $79 million and the city’s contribution to about $24 million. Approval of that package would extend the full reduction from three years to five.

Jackson said the program is intended to offset the development-charge revenue municipalities give up.

“Whether you apply for 30 per cent, 50 per cent or 100 per cent, the grant theoretically will reimburse you the equivalent amount of money,” he said. “So we shouldn’t be any worse off if we get the full amount of grant funding.”

Staff therefore expect the grant to compensate Sarnia for the forgone revenue, but Jackson acknowledged that avoiding a loss depends on the city receiving the full funding sought.

The payment schedule and other details will not be known until Sarnia receives a transfer-payment agreement, which Jackson said was expected within approximately one month. Annual payments are possible but have not been confirmed.

The projects included in the application are already listed in the city’s development-charges background study.

Without the grant, Jackson said, Sarnia would generally wait until housing development was ready to proceed before completing the associated infrastructure. The grant would allow the city to advance the projects proactively.

“We will use up our contribution earlier than we necessarily would have if we were waiting for housing to grow,” Jackson said.

The city’s overall contribution from its own funding sources is expected to remain roughly the same, but Sarnia would have to provide that money sooner than originally anticipated.

The reduction must be applied citywide. Staff confirmed that the program does not allow the city to target particular neighbourhoods or prioritize infill development through different discounts.

“We are not able to choose specific areas to apply different discounts to,” Jackson said.

Mayor Mike Bradley described the three-year period as a practical test of long-standing development-industry claims that the charges prevent housing construction.

“For years we’ve heard from the development industry, if we didn’t have development charges, 20 per cent, 50 per cent or zero, we’d see a lot more homes in the community,” Bradley said. “So this is a real test. Whatever the day we pass this, for three years, let’s see what it does to the housing business and housing starts in the community.”

The current development charge for a new single or semi-detached home is approximately $15,500 in rural areas and $19,800 in most urban areas.

Development Area 2 has a gross charge of approximately $39,600 for the same housing type, but an existing temporary 50-per-cent reduction lowers the amount payable to approximately $19,800. The proposed holiday would eliminate those amounts for qualifying new residential construction.

Development charges fund growth-related infrastructure and services, including roads, water, wastewater, stormwater, fire protection, policing and parks.

The staff report contains no requirement that the savings be passed to homebuyers or tenants and does not target the reduction toward affordable, rental or non-profit housing. Its consultation section lists only the city’s Finance Department.

Implementation remains conditional on the grant award being large enough to provide what staff consider a strategic benefit.

The exact award, payment schedule, approved projects and any repayment or clawback provisions will not be known until the transfer-payment agreement is received.

The decision continues a local debate over who should pay for growth.

In December 2025, council reduced residential development charges in Development Area 2 by 50 per cent until the end of 2027. At the time, Jackson warned that reducing the charges without compensating funding would shift the remaining infrastructure costs onto property taxes and water and sewer rates paid by existing residents.

The new federal-provincial program is intended to prevent that shift by replacing the revenue through infrastructure grants. Whether Sarnia will be fully compensated will depend on the eventual award and agreement.

Council has approved the development-charge reduction while the material financial and contractual terms remain outstanding. The three-year window will now serve as the real-world test Bradley described.