Backgrounder on development charges and municipal services in Ontario

Development charges

Development charges (sometimes referred to as DCs) are mandatory fees paid to a municipality by developers on new and redeveloped properties to help fund the growth-related infrastructure and capital costs needed to service the new development. These fees cover essential services such as roads, water, wastewater, fire, police, recreation, and transit.

All provinces allow municipalities to levy some form of development charge. The rules surrounding how the charges are structured, and what costs they can cover, vary from province to province.

Why are development charges important?

Fairness:

Development charges were meant to ensure that new developments pay for the cost for the increased demand on municipal services, rather than burdening existing taxpayers. However, development charges often do not cover the full cost of infrastructure expansion which means the remainder is often made up through property taxes.

Sustainability:

They help ensure that the necessary infrastructure is in place to support continued growth in a community. Development fee caps and/or restrictions only means that the developers save money – not the residents living in the municipality. Removing revenue collected from development charges means that municipalities (which are already underfunded) then need to fill gaps with other tax bases and/or raise taxes.

Transparency:

Municipalities are required to provide annual statements on the reserve funds used for development charges, detailing how the funds are collected and spent.

Yet Premier Doug Ford and Municipal Affairs Minister Rob Flack are asking municipalities throughout Ontario to effectively weaken their infrastructure by dropping or reducing this important fiscal pillar.

In their own words:

Doug Ford, Premier of Ontario

“[We have] to lower municipal development charges … I go back to the business days of half a loaf is better than no loaf, I know development charges mean everything, Mayor Parish has dropped them and Mayor Del Duca and a few others are considering. But you’ve got two choices, if you don’t contribute people won’t build homes and you get nothing or you get half a loaf and we can look at it later. I’d appreciate if you could really consider [lowering development charges] so we can stimulate housing in our province and put it in a timeframe, so we pressure the market to keep moving forward…”

Rob Flack, Minister of Municipal Affairs and Housing

“We know municipalities rely on [development charges] to pay for needed infrastructure, you cannot build homes without sidewalks, roads, water systems, and more … that is why we will ensure you can explore new and innovative models for water and wastewater infrastructure. We have started exploring a municipal service corporation for the Peel Region … while maintaining public ownership. We are going to be encouraging municipalities to cut development charges.”

Municipal service corporations are not the answer

Under the guise of building more housing, the Ford government is pressuring municipalities to remove their ownership of municipal public infrastructure. This will inevitably mean less oversight and higher costs for services such as emergency services, libraries, recreation programs, roadways, schools, water, etc.

Don’t be fooled by this American approach to city planning, where residents access to services depends on incomes.

Public ownership without public oversight is a smokescreen. According to the Association of Municipalities of Ontario (AMO), municipal services corporations are:

Established as municipally owned but planning and board decisions are separate from municipalities with non-elected board members. Financial statements may also be separate.

This means municipal councils are not responsible for decision making or oversight over service delivery. Residents effectively lose their ability to hold elected municipal councilors responsible for any loss of service or cost increases. Making matters worse, municipalities assume potential liability for any decisions made by the municipal service corporation.