In the attempt to balance budgets and fund its infrastructural improvements, communities across Ontario have long searched for potential revenue streams. Increasingly, the target has been new-home purchasers and new businesses through financing tools like development charges. But the future of how development charges are implemented, as well as how developments are planned, hangs in the balance as the province prepares to review the results of two major consultations. Announced on Aug. 20 by the Minister of Municipal Affairs and Housing, the Hon. Linda Jeffrey at the Association of Municipalities of Ontario’s (AMO) annual conference in Ottawa, the first consultation concerned Ontario’s land-use planning system and decision-making process, including appeals to the Ontario Municipal Board (OMB), while the second focused on the Development Charges Act (DCA) and other municipal development-related fees and charges. Each of the 80-day discussions is scheduled to come to a close on Jan. 10.
OHBA agreed that the time was right “for the province, municipalities and industry to make affordability and fairness a cornerstone of Ontario’s planning system,” according to its CEO, Joe Vaccaro. With respect to the land-use planning approvals process, Vaccaro observed, “this is an opportunity to have a fact-based discussion about how Ontario’s lengthy and complex public planning system is challenging housing affordability and adding to the costs of new communities for Ontarians.”
Regarding DCs, Vaccaro noted that, “by placing the new neighbours at the centre of this discussion in terms of affordability and fairness, we welcome the opportunity to have a detailed discussion on the impact of development charges, parkland dedication fees, Section 37 agreements and voluntary charges on housing affordability.”
In response to the Liberal government initiatives, OHBA organized two ad-hoc groups to engage and consult with its membership. OHBA Past President Leith Moore, VP of Development with the Sorbara Development Group and OHBA Treasurer Neil Rodgers, V.P. of Acquisitions and Land Development at Tribute Communities, co-chaired the planning/OMB committee, while Lyn Townsend, a lawyer with WeirFoulds LLP in Oakville and member of OHBA’s Executive Committee, chaired the group overseeing development charges.
Development charges have become a particular point of contention in recent years for OHBA members. Although an entire community might benefit from infrastructural upgrades to everything from bridges, highways and transit to recreation and cultural centres, municipalities have increasingly targeted new-home buyers and new businesses to pay the bills. Some municipalities, in fact, have relied so heavily on this tactic that development charges and other government-imposed charges can now account for up to a quarter of the price of the house or new employment centre. How municipalities determine and disperse those development charges, however, isn’t always as transparent as the industry and consumers would like.
In advance of provincial recommendations, OHBA has been busy getting its own message out. Apart from a bi-weekly newsletter and its ad-hoc committee work, which included inviting members to internal industry presentations on the scope of the consultations at five local HBAs across the province, OHBA also made a concerted effort to meet with key decision-makers throughout the fall. Along with BILD, it hosted MinisterJeffrey at a live and interactive discussion in front of 400 members from local associations on Sept. 20. A few days later, at the OHBA Conference Premier Kathleen Wynne addressed members at its President’s Gala in Niagara Falls held on Sept. 23rd. Both events were key opportunities for the association and industry to communicate their thoughts and concerns. On Nov. 1, OHBA and BILD invited the Minister of Infrastructure and Transportation, the Honourable Glen Murray, for a second interactive discussion. As part of its Board of Directors meeting on Nov. 6 at Queen’s Park, OHBA hosted an MPP reception at the Legislative Assembly, providing a unique opportunity for the leadership of its 30 local HBAs to engage in direct dialogue with elected representatives.
Such information-sharing has been invaluable given the heated political climate, particularly concerning the province’s complex land-use planning process and appeals system (the OMB). As the province continues to grow, there have been strong expressions of discontent from some municipalities, community ratepayer associations and mainstream media. Articles suggesting either the outright abolition of the OMB or a significant reduction in its powers have been commonplace. No one has been a more passionate crusader than councillor Adam Vaughan of downtown Toronto’s Trinity-Spadina ward. “As long as the OMB is in charge, it undermines our ability to deliver better planning and stronger neighbourhoods,” said Vaughan. “This (public consultation) isn’t planning reform; it’s a move, effectively, to give developers more power and cities less power and once again leave neighbourhoods vulnerable.”
OHBA disagrees. “Time and time again we see how difficult it is to get politics out of planning decisions,” says Vaccaro. “We needed to have a fact-based discussion about how Ontario’s complex public planning system requires a nonpolitical, adjudicative tribunal. Without it, planning decisions will be undermined by political pressure. A non-partisan, adjudicative tribunal can ensure governing legislation and good planning principles are applied to bring complete and livable communities forward that will serve the needs of Ontario’s growing population, create economic opportunities and support infrastructure investments across the province. It is time to educate all participants in the public planning process—existing residents, future residents, new neighbours, municipalities, the building and development sector and the provincial government—as we work together to make housing affordable and attract jobs to Ontario.”
There are several misconceptions about the OMB that need to be clarified, OHBA officials note. “Municipalities generally want to reform the OMB,” says Moore. “They feel that developers take advantage of the OMB process to circumvent (previous decisions). But the vast majority of cases settled are found in favour of the municipality’s initial planning report. So the conception that the board is always on our side is wrong.
“I think the OMB is a lightning rod for criticism,” Moore adds. “But in the minority of cases that it’s needed, it usually makes the right decision. There’s a quiet settlement or a good planning decision and nobody hears about it. But the media generally like to latch on to controversy, so every year there are a few cases that are controversial and the politicians play it up, and then you have your various actors—the developer, ratepayers associations, a local politician—and it makes for a good story for the media.”
Not that the process can’t be improved. “When things end up at the OMB for an appeal, it often means there was a breakdown at some point in the discussions or planning process,” says Moore.
“We think there can be improvements and efficiencies made at the front end of the process so that there are fewer appeals to the OMB at the back end,” says Mike Collins-Williams, OHBA’s Director of Policy. “A lot of municipality zoning is not just a couple of years out of date; it’s decades out of date.” He points out, for example, that Toronto hasn’t really updated its zoning since the 1970s. “There is a modern provincial planning framework in place, while in some cases there’s a municipality-planning framework that in no way, shape or form has anything to do how we’re building communities today. So then there are conflicts. There’s a breakdown, and political votes are needed and things end up at the OMB. But it’s only 4%-5% of cases that end up there, and we would like to see ways of making it even less.”
Minister Jeffrey has assured that “eliminating or changing the OMB’s operations” is not open for debate; merely improving the appeals process. She has also promised that new development levies on new homes and condos will not be discussed. That’s good news for builders, who argue that new communities are being used to finance long-term municipal infrastructure deficits.
“When municipalities do a development charges background study, they look at the growth coming in and the infrastructure required to support that growth. So they will cost out that they need to build XYZ over the next five or 10 years,” explains Collins-Williams. “But, looking back, we are seeing situations where money was collected to build a certain facility that has not been built. How is that money being accounted for and how transparent is that process? I think in some cases it seems to be less about charges needed to build the infrastructure and more about how they can collect the most money possible and then figure out how to allocate it later.”
“OHBA has been consistent in its position that growth should pay for growth,” says OHBA’s Vaccaro, “but municipalities must recognize infrastructure benefits to existing residents and for there to be greater fairness, accountability and transparency in all growth-related taxes, fees and charges.”
While the previous decade had witnessed significant planning reforms and new legislation controlling development in sensitive areas like the Greenbelt and Oak Ridges Moraine, the Development Charges Act had not been reviewed in more than 16 years. “From my perspective, I have to make sure whatever I put on the ground works for 444 municipalities,” Minister Jeffrey told the Brampton Guardian in October.
Here, too, the process can be improved. “Most municipalities are working just fine. I think it’s in the growth areas where there are challenges, because legislation hasn’t kept pace with land prices and the provincial goals of intensification and affordability,” says OHBA’s Lyn Townsend. “The way the legislation is structured right now, the municipality works on the development charges study for a year, and it gives the developers a very short time—20 days—to review the study, before there is a meeting and decisions are made. Where municipalities take the stand that they are not going to consult with the industry and deliver the background study themselves, and that study has some dramatic increases in it, at that point there is a real worry about how they arrived at that number.
“What I found really interesting at the OHBA session we had at Queen’s Park was the thought amongst some of the MPPs that the industry was actually trying to eliminate development charges,” Townsend observes. “I am hoping that through this dialogue process that there will be a better understanding that this isn’t about getting rid of development charges or parkland payments or Section 37 payments; it’s just about matching them with provincial goals of affordability, intensification and economic growth.”
A fear of not balancing the budget is compounding the issue, adds Townsend. “One problem I’ve noticed is that municipalities are afraid to carry any debt. But that’s a healthy thing to an extent. The province authorizes them to carry up to a 25% debt. By not carrying debt, where is the revenue going to come from? So that’s the first problem, and they’re looking at the development industry to help solve that—to take whatever additional costs are associated with that decision not to borrow and offload them onto the cost of the house as far as the market can bear.”
No one disputes the huge amount of infrastructure funding supplied by the federal and provincial governments—between 2007 and 2014, municipalities will receive a total of $11.8 billion in gas tax funding alone. The increased municipal fiscal capacity was expected to create new resources to allow for municipalities to increase local investments in their respective core infrastructures and also reduce a decades-in-the-making deficit in that realm, but this has not occurred, leaving municipalities to search for other revenue streams, including development charges. However, there appears to be a fundamental flaw in the political concept of DCs.
“There’s a big misconception that development charges are paid for by developers,” says OHBA President Eric DenOuden. “They don’t realize that it’s packed onto the price of the home and the new-home buyer pays for it. We call it the ‘New Neighbours Tax’—it’s a fee on the home.”
In the GTA, total charges, including DCs, are around 21%-23%, and in Milton they run about $60,000 ‘per door’ plus voluntary charges,but there are some small rural communities that don’t have any development charges at all. Over the last decade the pace of inflation has been running at 1.5% to 2.5% and the pace of new-home prices has increased 4%-7%, but in some cases the pace of DCs has increased 100%.
While there is a breaking point to what potential homebuyers or new employers can afford before they go elsewhere, there is also the economic domino effect that results from purchasers carrying large mortgages and having less disposable income to spend in the community. “The pushback we had on the Metrolinx proposal was that they were proposing another development charge on top of what homeowners are paying now. But how much is enough for a new-home buyer to pay?” questions Moore. “Why are we just looking at new neighbours and new communities—because they are not there to vote?”
Seizing this moment in Ontario history is crucial, says Moore. “There was a real overlap between the panel, the provincial intentions with the budget coming up, the parks consultation, the OMB consultation and the approval consultation, and our feeling is that this has been a great opportunity to join the dots and help to develop something that will work.”
“But there is a lot going on,” cautions Vaccaro. “There is the Golden panel; the Condo Act, which has been opened up for review; a number of different private members bills in flux; recent changes to the Endangered Species Act; the province has been consulting on a provincial policy statement for three years now and is still not done that; the growth plan is scheduled for review in a couple years, although they have already started consulting on that; and the Greenbelt is going to be up for review. There are so many balls in the air that something is bound to drop. Hopefully somebody in government is watching the big picture closely.”
“They are hard decisions for the government to make,” DenOuden concedes, “but we appreciate the open door to allow us to make concrete, fact-based submissions on both consultations—to tone down the rhetoric and assess the real problem and try to find real solutions that work for everybody.”