Fix budget woes by hiking development charges, Toronto councillor says

Justin Di Ciano says raising development charges “is the only choice” for Toronto.

Thestar.com
Dec. 1, 2015
By Betsy Powell

A councillor who campaigned on making developers “pay their fair share” has a solution to Toronto’s fiscal crunch: hike development charges to pay for transit and growth.

On Tuesday, city manager Peter Wallace warned of “underlying cost-pressures the city of Toronto has yet to come to grips with.” He plans to suggest a menu of proposed taxes and fees, but didn’t go into specifics.

Justin Di Ciano (Ward 5 Etobicoke Lakeshore) says raising development charges “is the only choice.”

“Growth-related costs should be borne by the developers, it’s that simple,” Di Ciano said Tuesday. The city has lost hundreds of millions annually in forgone development charges, he says.

Between 2015 and 2024, the city of Toronto estimates it will spend $6.2 billion on growth-related infrastructure and will collect $1.3 billion in development charges.

“Taxpayers are subsidizing a multibillion-dollar development industry,” says Di Ciano, vice-chair of the planning and growth committee and a member of the city’s budget committee.

“Residents need to understand this means higher property tax bills and higher utility bills if we are to pay for the infrastructure required to service growth in this city.”

The lobby group representing the development industry strongly opposes any increase.

“The housing sector is already being taxed enough,” says Stephen Deveaux, chair of the Building Industry and Land Development Association (BILD).

“If there are infrastructure needs for the municipality we should certainly be paying our fair share of those, but it has to be shared by the general taxpayer.”

BILD also argues boosting development charges will drive up the cost of already sky-high new home prices in Toronto. Di Ciano says that claim is “misleading.”

While development charges make up a portion of the purchase price for new residential dwellings, home prices are established by market conditions - interest rates, location, type of housing, access to transit, Di Ciano says.

“What happens is the price of land will go down, when development charges go up,” he says. “New homeowners are not paying more for something that benefits everyone.”

Toronto has the lowest development charges in the GTA, even after recent, phased-in increases. Builders are charged $35,638 for a new single family home and $15,256 for a one-bedroom condo.

Development charges in Mississauga, Oakville and Brampton are more than double those in Toronto, while construction and labour costs are the same.

“Home prices there are $100 less per square foot on average than in Toronto, and yet developers continue to build in those cities and continue to make money,” says Di Ciano.

By doubling the charges here, Toronto would bring in more than $4 billion to spend on infrastructure over the next 10 years, says Di Ciano, who spent a decade in commercial real estate before he was elected last year.

Bryan Tuckey, president and CEO of BILD, says it’s only logical that Toronto’s development charges would be lower than the rest of the GTA.

“When you’re building in existing neighbourhoods, the servicing is already there,” he says, noting that Toronto’s property tax rate is also the lowest in the GTA.

“I think the property taxpayer has some responsibility as well to maintain and upgrade existing servicing in municipalities - so it’s all about balance, it’s all about priorities.”