Local Government Latecomer Agreements
Latecomer agreements are development finance agreements between municipalities or regional districts and land or property developers. These agreements specify off-site infrastructure necessary for development to proceed.
Latecomer agreements also set the terms by which developers can recover costs for excess capacity beyond what is required for the initial development.
For a development to proceed, a developer may request, or a local government may require, that specific off-site works be provided, such as roads, water, sewage or drainage.
Excess & Non-Excess Capacity Works
To accommodate expected future growth, a local government may require these works include excess capacity beyond what is required for the initial development.
For example, a water main to a proposed subdivision may be sized larger than immediately required in order to service both the proposed subdivision and future growth in the area. The initial capital cost of this water main is divided into two components.
- Non-Excess Capacity: The portion of the total capital cost to service only the initial development, paid for by the initial developer
- Excess Capacity: The portion of the total capital costs in excess of what is required to service the initial development, paid for by either the initial developer or the local government
The cost of this excess capacity may be recovered from later development in the area and remitted back to the party (either the local government or the initial developer) that financed the initial excess capacity capital cost of the water main.
To recover costs, a local government will enter into a latecomer agreement with the initial developer. This agreement will identify the following:
- The proposed capital works to be constructed
- The associated costs for those works
- The portion of those costs that will service excess capacity
- Who will pay the initial capital costs of the excess capacity (either the local government or the initial developer)
- The method of recovering these costs from later development and how it will be applied
- The time frame over which these costs may be recovered, not exceeding 15 years from the date that the initial capital works were completed
If the local government pays the capital costs of the excess capacity, it can recover the costs by creating a local service area and applying a property tax or user-fee on the properties within the boundaries of the local service area, or it can apply a latecomer charge.
If the initial developer pays the capital costs of excess capacity, the local government may only apply a latecomer charge. In this case, the local government would levy and collect a latecomer charge from subsequent developers and remit the proceeds from the latecomer charge back to the initial developer to offset some or all of the burden of the initial capital works.
As part of the latecomer agreement, the local government and initial developer must determine what portion of the excess capacity will benefit the future development that will subsequently be serviced by the initial capital works. In order to connect to these capital works, a developer of the parcels must pay a latecomer charge to the local government based on the terms of the latecomer agreement.
The local government will levy and collect the latecomer charge from future development. If the local government paid for the excess capacity of the initial capital works (the portion of the works beyond what was required for the initial development) it will keep the collected latecomer charges.
However, if the initial developer paid for the excess capacity, the local government will remit the collected latecomer charges back to that initial developer. In either case, the latecomer charge must include the cumulative interest calculated annually at a rate established by bylaw.
These "upfront" infrastructure works may be paid for by either the local government or the original developer, and financed through a latecomer agreement. Under such an agreement, later developments that eventually hook up to the new infrastructure will pay a charge to the local government. If a private developer paid for the new infrastructure, the local government will remit the collected charge to that original developer for a period of up to 15 years from the date that the works were completed. Eligible works include water, sewer, roads and drainage.