Daily News from OHBA

July 29, 2013

Infrastructure and Growth

Who’s in charge here? Not just the provinces

The Globe and Mail

Published Monday, Jul. 29 2013, 6:00 AM EDT

Last updated Sunday, Jul. 28 2013, 11:04 PM EDT

The Premier of Ontario has a message for Ottawa as the federal government prepares to dole out more than $50-billion to fund desperately needed infrastructure improvements: Put up and shut up.

On the eve of last week’s meeting of the premiers-only Council of the Federation, Kathleen Wynne said Ottawa should provide the provinces with steady annual sums for infrastructure spending, instead of making them apply for help on a project-by-project basis. “There’s an ad-hoc nature the way the federal government does it,” Ms. Wynne explained. “We need a more predictable year-over-year plan.”

The premiers’ joint communiqué echoed that sentiment: “Provinces and territories are in the strongest position to understand their infrastructure priorities and how their capital spending drives economic prosperity, improves the movement of goods and people and builds the foundations for connecting to the global economy.”

Ms. Wynne’s Transportation Minister, Glen Murray, recently provided a blunter response to anyone who might challenge his supremacy in transit matters: “I’m in charge here.”

If anything, however, the spectacle Mr. Murray made of himself as he announced he was getting behind a subway for the Toronto suburb of Scarborough – instead of the already advanced light-rail transit project his government had previously backed – shows why taxpayers should be wary of giving the provinces any more control over infrastructure decisions than they already have.

Ontario’s crassly political decision to back Toronto Mayor Rob Ford’s ill-considered subway plan – just in time for next Thursday’s provincial by-election – was patently transparent. Yet, Mr. Murray shamelessly accused doubters of treating Scarborough residents as “second-class citizens.”

There is a class component in the Ford-Murray subway alliance, all right, but it’s not the one its main protagonists talk about. The three-stop subway extension would run through lower-density, higher-income areas whose residents tend to vote in bigger numbers and whose property values stand to benefit most from the proximity of a subway station – even if nobody uses it.

The seven-station LRT project would run through lower-income immigrant neighbourhoods and include a stop at a local community college. Students and immigrants depend on public transit more than others – but they don’t vote in the same proportion as property-owning suburbanites.

Mr. Murray says he wants the provincial transit agency to look into an alternative subway route that would serve more of those “priority neighbourhoods.” But he has not offered any more money than the $1.4-billion Ontario has allotted so far for the Scarborough subway, a sum that Toronto considers $400-million short of what it needs to proceed with the project.

In truth, the politicians have no clue what a subway would cost. While the LRT line could be up and running in a few years for $1.8-billion, the starting point for a subway scheduled to open in 2023 is $2.3-billion, based on a 2010 study. A City of Toronto staff report prepared before this month’s council vote to back the subway plan estimates that the “incremental capital cost” has risen by $1.1-billion since then. And that’s before incorporating any of Mr. Murray’s design requests.

What’s more, Mr. Ford and Mr. Murray have gotten behind a Scarborough underground without, as the city staff report notes, any clear understanding of “how a subway extension might impact on the transit network as a whole.” At the very least, it would leave less money for other priorities, such as a downtown relief line to lessen subway congestion in the core.

The Ford-Murray plan defies a basic rule of transit investment, namely that (except in rare cases) subways are meant for areas where residential and job density are highest. Everywhere else, LRTs and dedicated bus lanes – though not as sexy as subways – are more cost-effective. Electrified LRTs and buses that run on natural gas are better for the environment, too.

The driving principle of infrastructure investment – transit or roads – is getting the largest number of people to where they need to be to foster economic growth at the lowest financial and social cost. Ottawa has as much at stake as cities and provinces in making the right decisions.

“To the extent that the federal government collects most income taxes – and a large amount of the consumption-tax revenues that will result from higher incomes – it will benefit from infrastructure projects to a greater degree than provincial or municipal governments,” the C.D. Howe Institute’s Benjamin Dachis notes in a study released this month.

In other words, Mr. Murray, you’re not in charge.


June 12, 2013

Housing Industry

Government fees making homes out of reach

TORONTO — Up to one-quarter of the cost of a new home in the GTA is the direct result of government fees — especially municipal development charges that have skyrocketed in less than a decade, according to a new report by the building industry.

The growing list of fees being slapped on new home buyers now adds up to an average of $118,400, or 23 per cent, of the price of a new, single-detached home in the GTA, and more than $64,000, or 20 per cent, of the cost of a new highrise condo, said the Building Industry and Land Development Association in a report being released Tuesday.

Those charges — everything from municipal development charges to the HST and transit levies — have helped push the price of a new detached home to a record $640,000 and out of reach of a growing number of buyers, said Bryan Tuckey, president of BILD, which represents 1,400 building-related companies across the GTA.

In 2012, new home buyers in the GTA contributed about $1 billion to government coffers through development charges alone, Tuckey said. He estimates the carrying costs alone of all those government fees can be $60,000 over the life of a mortgage.

Developers say fees, especially development fees, have been escalating so quickly, they have no choice but to pass the costs on to buyers, and have actually diverted some of their building away from especially pricey municipalities like Markham.

But Oakville Mayor Rob Burton, whose municipality ranks tops in the report for fees on condo developments and second in the GTA for new home charges, said subdivisions have continued to sell out and builders’ real fear is protecting their profits.

“There is still huge headroom in the market price of new homes for us to be collecting the cost of growth from developers,” said Burton, adding that he’d like to see development fees cover 100 per cent of the cost of new roads, sewers and community centres needed for new subdivisions, but provincial legislation sets limits on what local governments can recoup from developers.

Municipal development charges alone have skyrocketed between 143 and 357 per cent just since 2004 in the six GTA municipalities studied, the report said.

But, when other government fees are added, such as the HST, land transfer taxes, education and GO Transit levies, as well as requirements for developers to allocate parkland or give cash in lieu, it’s clear that new home buyers are carrying an unfair share of the burden for infrastructure that benefits everyone, Tuckey said.

Those fees hit a peak in the fast-growing City of Markham where local development charges, combined with those levied by the Region of York, amount to $149,077, or 25 per cent of the cost of a new single-family home. And that’s not including a “voluntary” development levy — $5,000 per new home and $2,000 per condo — for a proposed $325 million NHL-sized hockey arena planned for Markham.

Markham Mayor Frank Scarpitti said $10 million has been collected through the special levy just on new homeowners.

“There is no way we could facilitate growth without development charges,” Scarpitti said. “There wouldn’t be another municipality in the GTA that would grow by a single house if we had to put the billions in new infrastructure needed to accommodate new growth on property taxes.”

Oakville ranks top when it comes to condos, with government fees including development charges from the city and Halton regional government adding up to $80,500 or 21 per cent of the price of a condo apartment, according to the report.

BILD commissioned real estate research and consulting firm Altus Group to examine the cumulative effect of government charges in six GTA municipalities, all of which, with the exception of Toronto, have two tiers of government and development charges: the City of Toronto, Oakville/Halton Region, Brampton/Peel Region, Markham/York Region, Ajax/Durham Region, and Bradford West Gwillimbury/Simcoe County.

That was before the City of Toronto, which has among the lowest development charges in the GTA but its own land transfer tax, announced it hopes to double its fees later this year. That could result in extra costs being passed down to thousands of condo buyers who are still waiting for their units to be built.

Affordability is becoming a major challenge across the GTA, and fees slapped on homeowners are part of the issue, but so are escalating land costs and the profits reaped by developers who are getting civic approvals to build higher, more lucrative, buildings or have farmland rezoned for more valuable residential construction, said James McKellar, associate dean of York University’s Schulich School of Business and an author of three studies on development fees.

“Of course, it’s grossly unfair for municipalities to say that new development will pay for all the new infrastructure. But municipalities never intended for (development charges) to be fair. And homebuyers don’t really care.

“There’s no question they are a reasonable cost for all the value that has been created (for developers) across the GTA from rezoning.”



Transit Expansion

Why the Public Transit Debate Is Misguided

Posted: 06/11/2013 11:50 am

David R. Miller

On the editorial pages of Toronto’s newspapers, there is a great debate about how to pay for the public transit expansion Toronto and the Toronto region desperately needs. The commentary is earnest, debating the merits of tolls, sales taxes and other so-called revenue tools. But I think the debate is misguided and this is the most important issue facing the Toronto region today, which is actually building transit with the money that has already been allocated.

I drew an important lesson in this regard from the experience of Mayor Ken Livingstone in London, England. Mayor Livingston introduced an incredibly unpopular congestion charge, charging everyone who entered the core of the City of London a fee. He rode out the unpopularity and the congestion fee, fairly quickly, became well regarded and popular. Why? Because it worked. Ken Livingstone’s congestion charge worked for a very simple reason. He put the plans in place beforehand for the expanded rapid transit that gave people a real choice — to pay the congestion charge or to take transit. In his case the rapid transit was by bus running in reserved right-of-way’s, given that London already has an excellent transit system.

Contrast this to Toronto where we have a 30-year history of starting and stopping projects. The Sheppard LRT, for example, was under construction in 2009 and was stopped by the City and Province in 2011. Council voted to re-start the project in 2012 but, for idealogical and control reasons, the Province of Ontario decided to take over the project and redo the procurement as a public-private partnership. This means that the Sheppard LRT, which commenced construction in 2009, will re-commence construction in approximately 2017. As it takes about four years to build, it could have been built twice in this time, not to mention the tens of millions of dollars of engineering work done by the TTC that has literally been thrown away.

If we are to draw lessons from the London experience, it’s not about the method of revenue tool — it’s about the fact that people need to see the rapid transit being built and need to be able to use it in order for them to accept the idea of paying more. I know people will pay more. In 2006 I ran on a platform of building a great city by increasing taxes and raising new revenues through the City of Toronto Act, and I received nearly 60 per cent of the vote. People will be prepared for different methods of raising revenue – land value capture, tolls, sales and parking taxes are possibilities, but ONLY if we can build the transit and show them that it works. With $8 billion already allocated it’s enough to build the Finch, Sheppard and Eglinton LRTs. My advice to the Premier: expedite all of that, get the shovels in the ground and then ask people to pay a little more. You will be much more likely to succeed.


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