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Who Funds Smart Growth?

As we continue to push for smart growth, the question of “who pays?” remains unclear.

By Nabila Haque


April 2, 2019

The City of Calgary is one of the most pronounced examples of urban sprawl in Canada. Like most North American cities, the bulk of Calgary’s expansion occurred during the automobile mania of the 20th century. This new era set the stage for suburbanization and soon enough, cars and single family homes filled in the landscapes beyond city limits. Today this dream is still alive and strong, but this delusory lifestyle is no longer a sustainable. The hidden costs of low-density auto-centric development, including traffic congestion and infrastructure duplication, are a threat to long-term sustainability. Nevertheless, developers continue to pursue greenfield land at the city fringes as it remains much cheaper than urban brownfields. For municipalities, exurban development demands higher upfront and lifetime infrastructure costs as opposed to urban densification. As such, growth management is becoming an increasing priority. Municipalities are increasingly shifting their visions to develop compact, livable, mixed-use, vibrant and less auto dependent communities; yet still, sprawl persists.

New Visions for a Booming City

In 2005, Calgary launched a long-term urban sustainability plan called imagineCALGARY to help guide the city into the future. The process engaged over 18,000 Calgarians and formed the basis for many long-term plans and policies including their Municipal Development Plan and the Calgary Transportation Plan. In response to the outcomes of imagineCALGARY a team was created to coordinate long-term implementation. The outcome of this is a document known as Plan it Calgary, a progressive sustainable growth strategy in preparation for 1.3 million new Calgarians over the next 60 years. Its principles focus on developing a compact city that supports walking, cycling, and transit as desired means of mobility while preserving open space, parks and other environmental amenities. This growth management strategy poses particular challenges for the city as it’s projected that 94 per cent of Calgary’s predicted growth will take place in its outer-lying communities.

The True Cost of Urban-Rural Divide

The City of Calgary has recently proposed a solution that asks suburban housing developers to cover the costs of city-delivered services like water and sewers. Developers warn against this idea saying that this fee would carry over to prospective homebuyers as home prices would soar by several thousand dollars, thus diminishing affordability. This ongoing debate which asks, “who pays for growth?” involves an understanding of the financial instrument known as Development Cost Charges (DCCs). DCCs levy a one-time fee for developers to help municipalities cover upfront infrastructure costs generated by development projects. As a revenue-raising fiscal tool, the role of DCCs should not be understated: as funding from the upper tiers of government diminishes, DCCs are one of the few methods municipalities have to pay for growth-related infrastructure. But as Pamela Blais notes in her book, Perverse Cities, DCCs do not always encourage more compact and sustainable development patterns for municipalities.

There are two opposing camps on the view of sprawl: one focuses on curbing sprawl to achieve sustainable growth, and the other defends it as natural market response to consumer preferences. It can be argued that though infrastructure financing encourages urban sprawl, sustainable growth is more likely achievable by restructuring tools and polices. When impact fees reflect the true cost of infrastructure services this can lead to denser metropolitan development. Calgary’s proposal to charge developers for building at the city’s edges is not meant to stop suburban development, but rather to reflect the true cost of suburban growth compared to densification. This is not a new concept. Researchers often support development charges as a means to pay for new growth-related infrastructure following an understanding that the onus should be on those that require the infrastructure, instead of the existing tax base.

Charging low density greenfield developments the same fees as higher density urban infill developments represents a cross subsidy between urban and suburban residents. This practice enables suburban home buyers to afford higher housing prices with low property tax burdens instead of forcing them to pay for the true infrastructure costs. Developers are able to make more money by offering higher bids for agricultural lands which inevitably leads to more agricultural land being converted to urban use. This is how infrastructure financing encourages urban sprawl.

From Cost Recovery Levy to Smart Growth Policy Tool

Although administratively simple, charging all properties of a classified typology the same costs without considering the geographic context of the property is clearly inefficient. Instead of acting as a financial instrument, when DCCs reflect the true cost of providing infrastructures they take into account the issues of location and density. When used as a planning tool, DCCs have the ability to impact the chain mentioned above and may even reverse it, leading to denser development within the city. When coordinated with urban planning, DCCs may contribute to smart growth in several ways: by raising funds for infrastructure that supports smart growth (e.g., transit), by influencing the location or type of growth proposed by developers, or by influencing the location decisions of residents. Understandably, even if DCCs are implemented in different ways, they cannot solve all growth-related problems. However, when used in conjunction with other growth management strategies, they can be an effective and powerful tool to address sprawl. For this, policy reformation at the municipal or provincial level is necessary to explore in order to evaluate the desired scope to effectively employing DCCs.

Nabila Haque is a Calgary-based planner. Her experience includes transportation planning, functional planning studies, multi-modal corridor studies and roadway capacity analysis. This includes working with traffic simulation and modelling software, intersection optimization and coordination. Beyond her work in Calgary, Nabila also has experience managing numerous planning projects in Bangladesh in urban and rural areas.

IBI Group’s LEAD program is designed to support employees who have the potential and desire to be future leaders within IBI Group; with the goal of assisting participants to learn about themselves, enhance new skills, and develop leadership competencies.

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