More development means more money, thanks to Section 37. Is it an unfair perk for downtown or compensation for endless construction?

Thestar.com
October 4, 2018
May Warren

For the dogs of downtown and their owners, Berczy Park’s whimsical fountain with 27 cast-iron canines (and one token cat) has quickly become a destination since its unveiling in summer 2017.

Berczy Park, near St. Lawrence Market, was partially paid for with funds from Section 37, which allows developers to exceed some zoning regulations in exchange for in-kind benefits or cash.

A place where puppies mingle with tourists, diners and snap-happy Instagrammers -- it’s a rare example of public art that’s managed to surprise and delight skeptics and even non-dog people.

All at no cost to the taxpayer.

The park’s roughly $8-million redevelopment was paid for in part by funds from Section 37, part of Ontario’s Planning Act that allows developers to exceed height and density zoning regulations in exchange for in-kind benefits or cash. (The rest was paid for with developer money under related sections of the act that secure parkland and benefits for minor zoning variances. The city pays for ongoing maintenance at the park, like any other.)

On top of playful animal parks, Section 37 money has been used for splash pads, playground upgrades, community centres, and even some affordable housing, among other things, since the act was introduced in the early 1980s. The catch is that, according to both the city’s own guidelines and decisions from the Ontario Municipal Board, the money must be spent in the same ward as the development, as the funds are meant to compensate for its impact.

But the high concentration of tall-tower development in the downtown core means those wards -- such as the old Ward 28, where Berczy Park is located, and neighbouring Ward 27 Toronto Centre-Rosedale, which have more than $22 million and $67 million respectively in their accounts as of May 2018 -- are getting the biggest pots of funding.

This has led to a perception that downtown is getting not only a disproportionate amount of development, but added perks to go with it -- something one Scarborough group wants to see changed.

It doesn’t make much sense to give Rosedale residents $66 million, said Dave Hardy, a planner and member of Scarborough Community Renewal Organization. “They’re not exactly out panhandling,” he said.

“And the need is great right across the city.”

As part of an occasional series, the Star is taking a closer look at the megacity, 20 years after amalgamation, and some of its old and new divisions.

Section 37 has become a touchstone for suburban/urban strife, with critics such as the Scarborough group saying what the money goes toward is arbitrary and could be better spent in other wards, while downtown councillors say it’s a modest amount to make up for the drawbacks of construction and densification.

There is a clear downtown/suburb divide when it comes to how much different wards have in the bank.

Four of the five wards with the highest totals are downtown -- with, predictably, downtown wards with a lot of development, Ward 27 (more than $67 million), and Ward 20 (more than $34 million), at the top. Ward 23 Willowdale ($24.4 million), in the former city of North York, rounds out the top three. Ward 28 -- which borders Ward 27 and will be combined with parts of it under the new 25-ward model -- is next at $22.2 million, and Ward 22 St. Paul’s makes the top five at $17.9 million.

Three of the five with the lowest totals are in the suburbs: Ward 12 York South-Weston at $2,930, Ward 29 Toronto Danforth at $7,283 and Ward 7 York West at $29,207. Neither Ward 1 North Etobicoke nor Ward 31 Beaches-East York has any money in the reserve.

Only two wards in Scarborough (Ward 37 and 38) have more than a million dollars. Ward 43 Scarborough East has the lowest in that former municipality with $199,510. In total, Scarborough wards have about $6.2 million.

For context, council approved an $11-billion 2018 operating budget in February.

Hardy would like to see a more equitable distribution of funds across the city, especially in lower-income areas in Scarborough.

His “long list” of practical projects he’d like to see funded if he “had a magic wand” includes an arts, conference and convention facility, a tool library, and support for a homeless shelter planned for Lawrence Ave. E.

“We have transit deserts and we have very little arts and culture facilities,” he said. “There’s a real unfairness here.”

Scarborough Community Renewal Organization's Dave Hardy (left) and Mimi Lau are seen outside the Citadel Community Church in Scarborough. The group would like to see the city revisit Section 37 as they say it disproportionately benefits downtown wards.

Councillor Michelle Holland -- the incumbent for Ward 35 who is now running against Gary Crawford (incumbent from the old Ward 36) in the new Ward 20 Scarborough Southwest -- has long been calling for the city to revisit Section 37 funding.

Her old ward has one of the lower balances, at $547,667, and she sees it as an issue of “haves and have nots.”

“When you look at the list you can see that it’s glaring and it’s extreme,” she said, adding she’d also like to see development, but it’s not as profitable for developers to build in her ward as it is downtown.

Development lawyer Patrick Devine is most concerned about what he sees as a lack of transparency around how the funds are calculated and distributed. Council approves the agreements and city planning staff have input, but what the money is spent on is largely up to each ward councillor.

“There is no oversight and no accountability,” he said. “Every councillor is the king or queen of their own ward.”

Under the new 25-ward model, Devine said his worries will only be amplified.

“For a system that is already flawed, by virtue of not having this oversight, to expand that, to give the same people even greater, wider, authority over a wider area, that does concern me,” he said.

If the money was properly used for “bread-and-butter” items to address impacts of development, such as new streetcars to ease overcrowding, and not “dessert,” like public art, he said, then tax dollars not used for priorities downtown could go to places like Scarborough.

In the redrawn wards, Section 37 funds will stay in the ward where the contributing development is located, a spokesperson for the city planning division wrote in an email. Over the last five years, the city has secured more than $308.6 million under Section 37, and the planning department is working with finance on developing an annual report on the balances.

Ward 27 Councillor Kristyn Wong-Tam, whose pot of more than $67 million is the largest of any councillor, says she held a series of community planning meetings to get public input on priorities, which she said included community centres, street beautification and heritage recognition. She then used that framework to direct Section 37 money.

Those funds have been put toward HIV/AIDS hospital Casey House, community housing and the Canadian Lesbian and Gay Archives, among other projects, in her ward.

She says the money is not enough to compensate for the stress of constant development -- and the construction, noise, dust and traffic that comes with it, which she would “love a break from.”

Wong-Tam objects to suburban councillors using the issue as “dog whistle politics” to prey on anti-downtown sentiment, and said they’re “misunderstanding” how Section 37 dollars are secured and spent.

“Downtown Toronto is an easy target for those who are representing the suburbs,” she said.

Councillor Joe Cressy, who represented Ward 20 under the old system, with a pot of more than $34 million, said calls for more equitable distribution of Section 37 funds come down to “the old Ford rhetoric about downtown vs. the suburbs, which is entirely grounded in populist posturing as opposed to in dollars and facts.”

He says he’s worked to spend Section 37 funds on large-scale, “transformative” projects such planned CityPlace schools and a community centre, a new YMCA in the entertainment district, and affordable housing, noting development charges already go toward citywide infrastructure such as transit and parks.

“Section 37 is a small amount of money intended to ensure that if you’re going to add people it remains livable,” he said.

Other projects in his ward, such as two upcoming west-end cat-themed parks -- to complement the dogs of the east -- were financed through another part of the planning act, Section 42, which requires developers to provide parkland, or cash to pay for parks.

Mimi Lau, who chairs the suburban planning committee for the Scarborough Community Renewal Organization, said “the time has come” to review Section 37.

She questions both whether it actually addresses the impact of densification and how it ties back to community needs.

“You’re getting more density, more people, more cars, and then because of that you’re getting a piece of public art. Well is that really compensation enough?” she said.

She’d like to see a more “formulaic” approach, based on the principle of transparency that relies less on the negotiation skills and creativity of individual councillors.

For Aaron Moore, a fellow at the Munk School’s Institute on Municipal Finance and Governance, the problem with Section 37 is that there’s no real rationale for why it’s being used or what it’s being used for.

The laws around it are “pretty vague,” which can limit what it’s spent on, as councillors don’t want it to be challenged by developers in court, and are focused towards “desirable visual amenities” rather than affordable housing -- a harder sell to developers.

Moore would rather see the province bring in general levies, a special levy for transit for example, that wouldn’t be based on the height of the building or “punish” density by making developers pay for going over height zoning.

“The province has provided this tool in the legislation that provides no guidelines on how to use it, and no rationale for why you would use it, and I think it’s incumbent on the province to review this and change it,” he said.

“At the very least, make it a lot clearer what the point of the tool is.”