Revisiting Development Charges

By a pleasant coincidence, The Urbanophile wrote about impact fees (aka development charges) today. This follows my admission that I don’t know much about the economics of development charges, and a piece in The Standard warning against raising Niagara Region’s charges.

Impact fees are fees charged to developers, typically residential developers, to help fund the capital expansion needs of public services such as sewers, parks, or roads resulting from the new housing units that will be added. This can be thousands of dollars per house in total. Also, developers are often required to construct 100% of utilities and infrastructure in the interior of their development, donate land for schools or fire stations, or even do localized road improvements. The idea is that the construction of the house creates a municipal liability that would otherwise be unfunded without the fee.

There are a couple of problems with impact fees. The first is that they are imposed on a locality by locality basis. Competition is good, but competition can also force all but the most attractive towns to limit their collection in order to entice developers. This creates economic development in the short term, but adds to the unfunded liability balance that will ultimately do in the city. The second problem is that these fees are not nearly high enough.

An externality is a cost or benefit (often a cost) that accrues to someone not party to a transaction, I think even most free marketers would suggest that externalities are a problem. In this case, the unfunded liabilities are negative externalities of development. The developer pockets the vast bulk of all of the profits and benefits flowing from his new subdivision. The residents of the whole town, both today’s and tomorrow’s, and even state and federal taxpayers, inherit the bill to make good on these costs.

He goes on to give an example of the burden a municipality has been saddled with by ‘disposable’ development. If you didn’t skim over that quote I suggest you read his entire post.

I am not entirely opposed to subsidizing development. The market can do a poor job of providing affordable housing, for example, and brownfield sites are notoriously difficult and expensive to clean up. But as with any public investment, we have to expect reasonable returns. It is unwise to subsidize a bare-bones suburban development that is going to decline and decay in a matter of years (not to mention imposing less obvious costs to health and social capital) for the short-term gain of a few jobs and property taxes.

When development charges are too low, the supposed economic benefits of development may be outweighed by the long-term costs.


I have another disease for WHO: it’s called letters-to-the-editor fever

For your amusement, another letter from the local paper:

Is the World Health Organization paying attention? Or has WHO not noticed?

Hundreds of thousands of people have died in the last few years in the Middle East.

WHO appears complacent to the point of being virtually silent, and displays very little empathy, or urgency, in its reactions and responses to war, especially when compared to those with the flu.

Why has WHO not thought of declaring a war a pandemic? Surely war is very detrimental to health.

The people of the industrial military complex are causing massive deaths and serious injuries in many countries. These people are causing their own unique strain of death and torture diseases.

Why is WHO so concerned about 25,300 people with runny noses and coughs, and for only 139 deaths, some of which can’t be attributed to the swine flu anyway? This pales in comparison to the hundreds of thousands of human lives lost, people maimed and tortured, left homeless and without family.

How does WHO warrant so much hype and attention when thousands have died, and will continue to die, simply because of a fight for the control of oil and territory, amounting to a disease known as Godlessness, greed and corruption, for which no vaccine exists.

There is truly more than just 25,300 sick people in this world — if you get my drift.

Never mind that WHO has limited resources, expertise, and a relatively narrow remit (which includes some truly devastating things like malaria). Never mind that H1N1 hysteria ended weeks ago. Never mind that a local newspaper is probably not the most effective forum for getting the word out about these sorts of things.

Just enjoy the crazy vibes. Soak ’em up. Appreciate your own sanity.

Urban golf courses

The patrons of Fairview Golf Course are not pleased with rumblings from council that it might be sold next year.

This is a good example of the trade-offs involved in city planning. There are direct benefits to quality of life and health from golfing, and this course seems to be especially popular with the older crowd. It is also nice to have green space in the centre of the city, though perhaps not fenced off as a golf course is.

For all its benefits, a golf course is probably not the most intensive use that site can support, and it is going to cost the city upwards of $300,000 to upgrade.

Ideally, the golf course would be replaced with something that provides at minimum the same quality of life and health benefits, but also pays property taxes. I was just thinking today that this parcel of land, squeezed between Fairview Mall and a large cluster of high-rise apartments, would be an excellent site for a mixed-use development.

Mizner Park, built on the site of a failed mall in suburban Florida

Mizner Park, built on the site of a failed mall in suburban Florida

Imagine an outdoor “mall” in the traditional sense lined with mixed-use buildings only a few stories high – retail and restaurants at ground level with offices and residences above. Properly integrated with the preexisting residences and neighbourhoods, it might actually reduce traffic by encouraging people to walk to their destinations. In addition, it would bring more people within walking distance of Fairview Mall, which is on the small side for a successful mall (and thus has an uncertain future).

It would be a welcome change from the strip malls, car dealerships, and big boxes in that corner of the city. If we are lucky, it might even catalyse the redevelopment and intensification of the neighbourhood. Mizner Park, above, has been called an “attachable fragment of urbanism” because it was an island of urbanism in a sea of parking lots and cul-de-sacs. The other side of that coin is that it is ready for new development to attach to it; rather than being oriented primarily towards an arterial road, new development nearby can build (so to speak) on the success of Mizner Park and itself propgate further examples of good urbanism.

Development Charges

Walter Sendzik wrote in the Standard today that it would be a bad idea to raise development charges to 50% from 19%, as staff are recommending. While this would bring the Region in line with other municipalities in the GTA, Sendzik argues we should be looking west to competitors in Brantford and London, where development charges are much lower.

I don’t know enough about the economics of development charges to make an informed comment on the proposed changes. Having said that, I am naturally inclined to trust the professionals.

Speaking generally, it seems to me that the prime selling-point of Niagara shouldn’t be rock bottom development prices. We have other assets in our favour, like our proximity to the US and our unique agricultural industries. Beggar-thy-neighbour policies leave a bad taste in my mouth.

Additionally, it might be consistent with the spirit (if not the letter) of the Places to Grow Act to throw a monkey wrench in the high-volume low-markup  development industry that gives us acres of single detached homes and big box retail. And if that’s the case, we might be looking at another north-south battle in Niagara, which means this ought to be interesting.

Quick thoughts OPCs on TVO

The Star reports from the set.

The most surprising thing, to me,  was how Frank Klees presented himself as the second-most moderate candidate. Wasn’t he considered the most conservative candidate for the federal Conservatives a few years ago?

For what it’s worth, I’m the kind of voter who might have voted for a PC candidate when John Tory was running the show. I like to think there are more people like me, and if they hadn’t stumbled with the religious schools mess the province might have a different government today. These candidates, especially Hudak, should keep the “progressive” of PC in mind.

Ontario PC candidates will be on The Agenda tonight

I plan to watch though I have a hard time imagining there will be any substance to it.  Politicians are not the most interesting people when they are up for election.

Episode page at TVO website.

Let’s start with some low-hanging fruit.

Two of three letters to the editor today make me weep for humanity.

First, some guy is upset enough over Human Rights Tribunals that he wrote a letter to the editor (all the cool kids have blogs), decided which OPC candidate to vote for based on the issue (even though, I think, everybody but Elliot wants to do away with them), and is donating money to some other guy’s legal defence. Yeah, there are problems with these tribunals, but are they worth getting all worked up about?

The second letter is a pean to Mike Harris. The basic thrust of this guy’s argument is that since the recession was “largely” was caused by borrowing too much money we are fools to try to spend our way out of this recession. That’s silly. The credit crunch was caused by too many loans to build unnecessary houses for people who couldn’t afford them. That doens’t make all borrowing a bad idea. How many people get through medical school without borrowing money? The key is to invest all this spending in useful stuff, like doctors and infrastructure rather than monuments to waste in the suburbs.