The centerpiece of the proposed funding package for the CalgaryNEXT project is a $240 million Community Revitalization Levy, aimed at transforming the West Village from a bunch of under-used land beside the river into a full-fledged community.
Of course, nobody really knows much about Community Revitalization Levies other than they’ve been used in the East Village. So I did a bit of digging, and here’s what I figured out.
Here’s the gist: a Community Revitalization Levy arbitrarily draws a box around an area. Everything within that area is subject to the levy. Via the Calgary Municipal Land Corporation, here’s the basic concept:
Similar to the Tax Increment Financing (TIF) used widely in the United
States, the CRL provides a means to segregate property tax revenue
increases that result from redevelopment in the Rivers District into a
fund for infrastructure improvements. The City of Calgary levies and
collects the CRL through the property tax system and then allocates the
funds to CMLC to implement the Rivers District Community Revitalization
So basically, you get a loan against the value of future tax revenues in order to develop the infastructure necessary for future development. In other words, you build the literal groundwork – roads and sewers and other such things – to facilitate future development.
THE EAST VILLAGE
Now, remember how I mentioned how you can arbitrarily draw a box? The construction of The Bow downtown technically fell within the confines of the East Village, so its tax revenues fell within the East Village and helped out with the levy.
Coun. Druh Farrell said the Bow building was the “insurance” in the
East Village and almost eliminated any risk of the community
revitalization levy failing to pay down the debt.
“It would still be successful without the Bow,” Farrell said. “(But)
the Bow enabled us to go to the province and make a business case, show
that we’ve looked at every scenario to mitigate risk.
“Most people see East Village and see it developing, but they don’t realize the rigour that went into mitigating risk.”
Even if the redevelopment of the East Village took forever, the tax revenues from The Bow at least ensured that there wouldn’t be zero dollars coming in against the value of the loan. So you can have things like the National Music Centre and the new public library going up in the East Village and not drawing in a ton of money in tax revenue because you have The Bow operating as a big shiny tax generator for the whole area. It was built first, and it allowed the developers to have a bit of confidence in the financial side of the process.
And that’s the rub.
THE WEST VILLAGE
Let’s just say that the idea for the West Village is that the CalgaryNEXT development, owned by the city, would be the big anchor project for the revitalization zone. The big, obvious problem with that is that as a city-owned project, the city wouldn’t be able to collect tax revenue on itself. So you wouldn’t have the big, shiny tax generating anchor project that would allow them to have a safety net with which to fund everything else, or on which to make a business case to the province for the levy in the first place.
A Community Revitalization Levy for the West Village makes a great amount of sense as a concept. As a mechanism to fund infrastructure, they can work really well – as long as there’s a tax-paying anchor tenant in a particular revitalization zone to provide some back-stop tax revenue in case development is slow at the beginning. CalgaryNEXT doesn’t fit the bill, and actually feels like a second piece of the puzzle – akin to the National Music Centre or the new central library – a big cultural piece that can’t be relied upon as a tax haven.
For now, with all the expensive work that needs to be done in the West Village – even ignoring the creosote issues – using a revitalization levy to fund the CalgaryNEXT project itself doesn’t seem to make much sense. But if somehow they lure in a big, expensive, tax-paying anchor tenant to pair with CalgaryNEXT in the first bit of development in the area, then all bets are off.