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Development agreements

Large development areas normally undertaken by private developers require a Development Agreement (DA) between The City and the developer. A DA is a legal contract for all residential, industrial and commercial developments. It sets out the terms and conditions under which development of the lands are to take place within the city, including the responsibility to construct public facilities and associated financial obligations.

New Tiering and Securities Framework revisions for 2020


Changes to The City’s Tiering and Securities (T&S) framework will reduce barriers for new developers to ​enter the Calgary market.

The City’s Planning and Development department uses a Tiering and Securities framework to rank developers into tiers that determine the securities amount required before construction begins.  The revisions provide a risk-managed approach to supporting new investment opportunities through easing securities requirements for developers who meet their performance requirements.

City of Calgary staff members and BILD Calgary representatives came together last year to review the current process, including risk factors for the City, market trends, security requirements, developers’ track records, and best practices in the industry.

Key changes include:

  • A revised tier system, with new criteria determining a developer’s tiering
  • Reduced security amounts for companies meeting criteria
  • Timing of the security reduction (at each CCC) and securing the off-site obligations
  • Change in former three-tier numbered system to a five-tier letter system that more precisely reflects a developer’s track record in meeting project requirements
  • Ability for upward movement in tier system based on performance

The changes will allow developers to use money for other community investment instead of capital being locked into securities. The end goal is to support a robust development industry that addresses demand in Calgary’s new and existing communities.

The Tiering and Securities​ recommendations are outlined in detail in the 2020 Terms and Conditions – Development Agreement.  

Tiering and Securities criteria

The following criteria are to be met for all Development Agreements (DA).

  % of Construction costs in UDO Determining criteria
A % of Construction costs in UDO: 8% Determining criteria:
  • 6 DAs (at least 4 from CoC) and active in the past 5 years
  • Obligations met within DA timelines
  • At the discretion of Calgary Approvals Coordination
B % of Construction costs in UDO: 8% Determining criteria:
  • 4 DAs (at least 2 from CoC) and active in the past 5 years
  • Obligations met within DA timelines
  • 2 references from another municipality representing substantial development experience if all 4 are not from CoC
C % of Construction costs in UDO: 25% Determining criteria:
  • 2 DAs (from CoC or elsewhere) and active in the past 5 years
  • Obligations met within DA timelines
  • References from another municipality if experiences are only elsewhere
D % of Construction costs in UDO: 65% Determining criteria:
  • No experience or inactive in past 5 years
  • Issues meeting DA obligations
E % of Construction costs in UDO: TBD (CAC discretion on a per case basis) Determining criteria:
  • Developer with major breach of DA
  • Developer with frequent minor breaches of DA
  • Poor reference from another municipality

Security calculation based on construction costs (now applied to all tiers)

  • Minimum security $150,000
  • Letter of Credit and Performance Bonds continue to be accepted

Performance Security Reduction (PSR)

  • Security reduction can occur after the first CCC for all tiers. Will not reduce beyond outstanding Obligations and Levies
  • Exception to this rule is construction of off-site infrastructure. Security will be reduced upon issuance of each CCC to $0.00

File Management

  • All DAs currently in-progress will not be affected by the new Tiering system​
  • A single "Developer of Record" is still required

New Tiers

  • Additional tiers will allow for easier movement between tiers
    • Lower number of DAs required to move up a tier

Recognition of Experience

  • Developers new to Calgary (vs. new developers) will be able to enter the system at an appropriate tier rather than at the entry level

Developer Activity

  • Developers must stay active to retain their Tier
    • 5 year window, reflecting:
      • track record of an organization
      • consistency of ownership
      • team membership
      • current development experience

Downward Movement Based on Negative Performance

Re-categorized downward for repeated Minor breaches of a Development Agreement or a Major breach (CCCs/FACs requirements)

Minor performance issues Major performance issues
Minor performance issues:

Failure to meet requirements on:

  • Timely payments of Deposits and Repayments
  • Failing to provide Top Lift Bond
  • Failing to provide all insurance requirements
  • Commencement of construction prior to “permission to construct” letter or Inspector sets submitted - under an executed DA
Major performance issues:

Failure to meet requirements on -

  • Commencement of construction prior to a signed DA or approved construction drawings
  • Construction not completed on time (apply for CCC/FAC within timelines)
  • Renew security as per DA
  • Disturbance of ER, wet lands or other sensitive areas without proper approvals

In 2020, all developers will be evaluated against the new tiering criteria as they enter into new DAs

Tier 3 developers will not automatically be placed in Tier A of B (existing track record will be taken into consideration)

Minimum performance security requirements (remains the same) $150,000, in addition to all other amounts payable to The City​​​​​​​​

Tiering and Securities FAQ

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What is the Tiering and Securities framework?

The City of Calgary uses a tiering system to rank a developer’s potential performance in meeting construction project agreements and requirements. This ranking then determines the amount of performance securities a developer must post before construction begins.  This process is  known as Tiering and Securities (T&S) and forms part of The City’s Develo​pment Agreement which is updated annually.

Why Is The City implementing changes to the Tiering and Securities process?

The City wishes to ensure a business- friendly environment for developers by addressing barriers to market entry.  To help achieve this goal, The City has revamped the T&S structure. The changes streamline the process, ease securities requirements and provide incentive to developers for investing in projects such as homes, businesses, institutions and amenities that make Calgary a great place to live.  

When do changes come into effect and where can I view the details?

In January 2020, The City and BILD agreed in principle to recommendations. An endorsement letter outlining industry’s support was signed and final changes endorsed in February. 

What is the revised Tier structure?

The former numbered, three-tiered system (1, 2 or 3) has been updated to a lettered, five-tier (A, B, C, D, E) system. Security requirements have been reduced and the Framework revisions allow for quicker upward movement through the system. The revisions provide more financial flexibility to developers.

Tier placement considers track records of each developer, use of critical infrastructure (example: sidewalks, erosion control, water mains, storm ponds etc.), as well as market and economic condition changes.

A translation table has been created between the old system and the new. As is our normal practice, City staff from Calgary Approvals Coordination will reach out to individual developers and discuss tiering levels.

How do changes affect developers new to the Calgary market?

In 2020, new developers’ ranking in T&S will fall into Tier D, with security set at 65 per cent of estimated construction costs as opposed to the former 100 per cent of estimated construction costs.  

What if a developer feels that their assigned tier is not reflective of risk level?

As is our standard practice, staff from Calgary Approvals Coordination will meet with a developer to review security calculations, recognition of experience, track records and references as well as other determining factors. 

How will you ensure continuous improvement in the T&S process?

Understanding trends and supporting the industry is a key goal for Planning & Development. The City is continuously looking at ways to improve services for customers and to this end, considers valuable feedback that helps build a more vibrant city.

Ways we will continuously improve T&S include:

  • Better metrics
  • Explore further incentives for good performance
  • Continuous performance monitoring
  • Regular T&S health checks
  • Annual development agreement reviews and updates
  • Continued engagement and relationship building

What if I already have a Development Agreement in place – will the changes affect me?

The changes affect projects beginning in 2020.

What factors affect securities requirements?

  • Changes ensure equity among tiers, security calculated as a percentage of construction costs.
  • Key performance indicators affect Tier placement, providing incentive for good performance.
  • A developer will move upward when criteria of previous tiers have been met.
  • More precise definitions of minor and major performance criteria.
  • Use of critical infrastructure anchors the calculation for entry level tier security and allows for high tiers to be lowered comparatively.

 
 
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