Higher Fees? No, Lower Subsidies

Posted April 28, 2011
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Calgary has many suburban communities. Many new suburban communities. They pop up so fast, it's hard to keep track.  Symons Valley, Silverado, Wentworth. I'll forgive you if you've never heard of these communities. Many of them are generic and uninspiring, unwalkable and unattractive. And communities like these continue to spring up in the farthest reaches of Calgary's borders. The sprawl of our city from the geographic footprint of these communities is Calgary's greatest problem. The sprawl is socially and environmentally unsustainable, and as bad as that is, it is even more damaging economically, sending our city into a mire of debt as we continue pouring public money into strained transit and infrastructure to support these communities.

Calgary also has many citizens who believe in the power of the free market. That a market where supply is bought and sold at its true cost, bereft of government intervention, is beneficial for consumers and retailers alike because environmental, economic and social abuses will be phased out by market forces. I have argued, and will continue to argue that the benefits described aren't possible when market forces favour short term greed over long term solutions. As such I favour smart government regulation and targeted investment that considers the big, long-term picture, to steer the economy away from problems before they happen.

The issue is this: the City of Calgary is proposing developers of these new communities start footing more of the bill for their development. Developers make new neighbourhoods on the edge of the city, and it's up to the rest of Calgarians to pay for servicing that community with things like roads, transit, water and sewage. As it stands now, developers pay a small fee per house to the City to cover these costs, but the fee isn't anywhere close to recovering the expense, so Calgary plunges into debt. Regardless of your support for government involvement in the market, or their absence from it, I will tackle this issue from both perspectives.

If you favour a free market, it's time to get beind what you stand for. The fees Calgary charges to developers need to go up, because they are not fees, they are subsidies, and they are too high. I had the chance to debate with Ric McIver on this issue a week before the Calgary Mayoral election. He fancies himself as a free market guy, yet he doesn't support ending these subsidies. Why would he go against his convictions on this issue (other than the fact developers subsidized his election campaigns to the tune of hundreds of thousands of dollars)? Well he told me that the problem with eliminating subsidies to developers is that they'd pass on their increased costs to home buyers. He said because we don't live in a vacuum, home buyers would flock to bedroom communities like Airdrie and Chestermere, and we would no longer get their property taxes. He may be right about all of that, except for suggesting any of that is a problem.

What is a  problem is that Calgary never receives enough from the property taxes of these new communities to cover the cost of building and maintaining infrastructure for them. So for every home built on Calgary's outskirts that attracts someone to pay their property taxes here, we are at a net loss. In other words, it's more economically damaging for us to attract new Calgarians to the outskirts of town than have them not live here at all. If we respect the free market by removing these subsidies, we can save our city's economy and not artificially lower the cost of urban sprawl below what it's market value should be.

If you favour smart government investment like I do, these developer subsidies are the wrong choice. Calgary's problems with sprawl are well documented: sprawl strains our police and fire coverage, our transit and infrastructure, the city's budget and our property taxes. We want to invest in solutions to those problems, not their cause. Even worse, these new communities are often poorly designed, unwalkable and come with their own set of problems. Often their only saving grace is their artificially low cost, which only exists because all Calgarians are paying to have it that way.

We need to provide affordable housing, but subsidizing the cost of homes only the outskirts of the city isn't the way to do it. If we send lower income Calgarians to the boonies, provide strained infrastructure and transit to them, and break the city's economy doing it, we will cripple our city and set a course for turning our suburbs into slums. Affordable housing isn't an incentive to bringing in new Calgarians if the city tears itself apart to do so - they have affordable housing in Detroit, but people aren't moving there. There are many measures we can take to create affordable housing in Calgary that don't break the bank: Secondary suites, density, transit oriented development and mixed income neighbourhoods, yet these are issues many Calgary alderman have voted against. We need to stop pandering to developers and start subsidizing smart growth that helps alleviate problems with our city, not create them.

 

The argument is framed wrong by many. The City has not proposed to hike the levies that developers must pay - the City is considering lowering their subsidies to developers. Developers should no longer rely on the taxpayers' dime to make their communities artifically cheap in order to turn a profit - they will now have to focus on creating liveable communities that people want to buy in to. So whether you believe in a free market or a regulated one, or could care less about markets and just want Calgary to be the best city it can be, these developer subsidies aren't the answer, and you need to make sure city council knows you feel that way.