Brownfields Redevelopment  Toolbox

Step 3 - Transaction

Step 3 - Transaction (sub-directory)

Create Financial Incentives

Financial incentive programs that have been developed and implemented by municipalities are designed to level the playing field between brownfield redevelopments and greenfield developments. The ability to create financial incentive programs is dependent on the provincial/territorial legislation and regulations. 

In Ontario, new regulations under the Planning Act in relation to a municipality’s Community Improvement Plan (CIP), allow municipalities to freeze or cancel the municipal portion of new property taxes on contaminated sites. The Ministry of Finance may match the municipal tax treatment for the education portion of the property tax. 


 Types of Incentives

Municipalities across Ontario have adopted or implemented several financial incentive programs that encourage brownfields redevelopment.

  • Façade Improvement Loans
  • Special Study Grants
  • Elimination of Development Charges
  • Direct Grants for Brownfield Projects
  • Tax Incremental Financing (TIF)
  • Reduction of Park Dedication Fees
  • Exempt Sign Bylaw Fees
  • Freezing or Cancelling of Municipal Taxes
  • Capital Budget Adjustments for Infrastructure
  • Tax Arrears Cancellation Policies
  • Reduced Tipping Fees at Landfill Sites
Sample Models

An Ontario Tax Increment-Based Financing or Grant model provided by MAH

The property owner/tenant, as applicable, is responsible for the full payment of taxes, as billed, after which the municipality will provide the grant payment.
  • In this approach, a grant is based on new money, not existing taxes
  • It is recommended that legal or professional advice be obtained if any actual proposal is involved
Assumptions for grant program and grant calculations to registered or assessed owner:
  1. Grant period is 10 years
  2. The municipal tax portion before redevelopment is a constant $10,000
  3. The municipal tax portion after redevelopment is a constant $110,000
  4. The tax increment equivalent is a constant $100,000 (i.e. $110,000 less $10,000) per year over the grant period
  5. In year one of the program, the grant to the property owner is equal to 100 per cent of the tax increment. Thereafter, the grant decreases by 10 per cent per year (i.e., year two = 90 per cent, year three = 80 per cent etc.) The payments stop altogether in year 11.
Projected outcome:
  • Municipal tax portion for years 1 through 10 = $1 million
  • Grant value for the years 1 through 10 = $550,000
Graph showing taxes after redevelopment - taxes before redevelopment = Tax Increment $110,000 less $10,000 = $100,000

Most municipalities like this grant model as the money fronted is from the developer (i.e. the developer pays the taxes and then receives a grant). If the project is successful, no existing tax dollars (municipal revenue) are required and after year 11, the municipality will receive 100% of their portion in property taxes generated. 

Note that with yearly re-assessments, property assessment values tend to increase. As assessments increase, the grant amount would decrease relative to the increase, thereby having the effect of increasing revenues to the municipality.

Discussion Point: If this is in a CIP, what is its budget impact? (How big is the proposal?)

 Municipal Examples

There are several municipalities in Ontario that understand that sustainable development must include the productive reuse of brownfields. To encourage property owners to clean up brownfield sites, these municipalities have developed community improvement plans and offer financial tools.

The City of Hamilton has prepared a Community Improvement Plan that address brownfields and developed a Strategy, the Environmental Remediation and Site Enhancement (ERASE) Plan, to promote cleanup and reuse of brownfields. The city uses the ERASE program to focus on redeveloping industrial sites in targeted neighbourhoods. Key components of the ERASE plan include a grant program and assistance with marketing.
  • Properties within the 3,400 acre ERASE Community Improvement Project Area are eligible for ERASE programs, subject to meeting the program requirements contained in the ERASE Plan and all other requirements of the City.
  • Grants are available to provide financial relief to property owners who undertake and complete brownfield redevelopment projects within the project area. These grants cover the following eligible program costs:
    • Environmental remediation and environmental studies;
    • Demolition; and
    • Site preparation including construction/improvement of on-site public works.
The City of Cambridge offers a wide variety of Financial Incentives under the flag of “Restore, Rebuild and Rejuvenate” to help developers and investors reduce the cost of redeveloping sites and buildings. This is a guide to the financial incentives offered by the Corporation of the City of Cambridge designed to support investment in the downtown Core Areas of Galt City Centre, Hespeler Village and Preston Town Centre.

The City of Kitchener is very progressive in addressing brownfields. Kitchener’s program, the “EDGE” (Encouraging Development for Growth Efficiency), is a comprehensive package of Incentive programs intended to promote the re-urbanization of the developed areas of the city, including the downtown and inner city areas. The city also developed a "Business Case", (The Downtown Investment Package), which is driving economic growth in the Waterloo Region. 

The City of Toronto provides aid through their Economic Development Division. The division launched an industrial and office investments grants program in July 2004 and launched the New Toronto Community Improvement Plan. The plan targets South Etobicoke to stimulate the industrial and office investment within a specific area of the city. Their financial incentive programs are designed to encourage redevelopment of brownfields into productive employment lands. 
  • New investment grant programs will include a tax grant for industrial and office development, expansion and retrofit, including site remediation as well as a façade grant to redesign, renovate or restore building facades.
  • The grants are available for office, media research and development, warehousing and distribution and other industrial uses. However, the grants are not available for residential development, hotels, banks, retail centres or gas stations.
  • The City will run a pilot program that provides grants for remediation up to 62.5% of the new municipal property taxes generated by the new development over a 12-year period. For projects that do not require remediation, the grants will cover 55% of the new incremental taxes over ten years.
  • Furthermore, in order to improve street facades, the city is prepared to provide up to $12,500 to cover 50% of costs for facade improvement with a minimum of $5,000 improvements.
  • This program is similar to Tax Increment-based Financing (TIF), however the Toronto program differs in that the city foregoes revenue only once the private investment has occurred and the remediation and redevelopment has been completed.
South Etobicoke, which is in the centre of a “mature” employment area, already has plans in place for comprehensive redevelopment. Projects within this area include: 
  • The site of the proposed Toronto Police Services Training Facility;
  • The former Goodyear Site which is now a 8 hectare residential community;
  • The Humber College Lakeshore Campus – a multi-million dollar investment in the restoration of the former Mimico Lunatic Asylum; and
  • TEDCO’s recent site acquisition of a 16 hectare property which will accommodate new employment uses.
The following graph demonstrates how the Toronto Rehabilitation Grant payback program works in correspondence with taxes generated over the rehabilitated land.

City of Toronto: The Rehabilitation Grant


City of Toronto's: Sample Rehabilitation Grant Calculation
Values based on a 150,000 sq.ft. building and 15 acre parcel of land.
Current Value Assessment (CVA)  $2,190,000
Pre-dev Taxes  $ 89,000
New Investment[1] $5,250,000
New CVA (With Investment)[2] $5,340,000
Post Dev Taxes[3] $ 278,000
Tax Increment  $ 189,000
Municipal Share $ 98,000
10-year Grant Total[4] $ 540,000
12-year Grant Total[5] $ 736,000
  (Includes Remediation)
  **Figures have been rounded
[1] Based on $35/sq.ft.
[2] Assumed investment to CVA increase ratio is 60%
[3] New Property Tax premised on revised CVA
[4] Maximum 55% of tax increment returned to the property owner over the 10-year term
[5] Maximum 62.5% of tax increment returned to the property owner over the 12-year term

The information portrayed in the chart and calculation above can be used to present a Business Case to council for implementing financial incentive programs. The calculation highlights the revenue generated by new development as opposed to the status quo, and demonstrates that over the 10-year program, every $1 of public funds generates approximately $10 in private funds.

The Niagara Region Incentive Program:

In Niagara Region, the Council of Regional Municipalities of Niagara approved the Smart Niagara Incentive Program, which includes several financial incentive programs through the municipalities. 

These include: 
  • Brownfield Tax Assistance Program
  • Tax Arrears Credit
  • Environmental Assessment Grant Program
  • Municipal Brownfields Leadership Program
The Niagara Economic and Tourism Corporation (NETC) developed Smarter Niagara: Smart Growth Implementation Programs, which provides “Administrative Procedures for Implementation of Waiver/Exemption from Regional Development Charges” (NETC – Smarter Niagara). 


Further examples of Municipal Financial Incentive Programs and Strategies: