Discussion on Development Charges in #Windsor

This week there was a flurry of discussion around development charges (DCs) in Windsor, with the reporting that a proposal is going to Council next week calling for a 51% increase in there existing rates. The response saw an interesting debate erupt on Councilor Chris Holt’s Facebook Page between Councilors  Holt and Bortolin and Developer Peter Valante. Mr. Valante’s concern of course is maximizing profit for his business and DCs are certainly a consideration when deciding to undertake new development projects within the city. Councilors Holt and Bortolin have broader concerns to their constituents, taxpayers and Windsorites as a whole.

I have done some academic and think tank research on development charges and what I have found is that there is mixed evidence that hiking charges will reduce development. A significant amount of academic research has been done in the United States on development charges and urban growth, and they have found that the impact on new development largely relates to market elasticity of demand and its mirror elasticity of supply. In non-economic jargon, it means that in cities with hot building/housing markets charges can be hiked and see little impact, the opposite is true for cooler housing markets.

A report by the City of Hamilton provides a wide appendix on available (albeit slightly dated) literature on DCs. The general conclusions are that there are a wide range of factors that impact development and growth, which include: the level of development charges, overall housing market conditions, types of development being proposed, economic conditions, population growth, the selected area of the development and others.

Race to the Bottom?

As I have written in a number of other posts, Windsor is cursed by geography. Surrounded by a number of livable communities that are in easy commuting distance, people can live somewhere else and work in Windsor. Unless Windsor wishes to enter a race to the bottom with no guarantee that our community will win, an increase in charges could put the city on the back foot when it comes to development. With no upper level government to mandate DC levels across the region there isn’t going to be a satisfactory outcome anytime soon, all that will occur is a game of chicken with various jurisdictions watching and waiting to act on DCs based on their neighbours’ position.

Of course, if we don’t take part in this race to the bottom there is the risk that the City of Windsor/Council could be branded by business or other groups as anti-development or anti-job. From my experience at the Economic Development Corporation, even if the fact isn’t true, perception ways heavily on business decisions as site selectors and planners do examine and rely on media reports and local impressions as well as financial implications in determining whether they choose a particular city or region for closer evaluation.

Charge vs Tax

As Mark Graston’s cartoon illustrated on Friday, holding the line or decreasing DCs would likely mean higher taxes for the average citizen of Windsor over the long term. Unfortunately, there is no easy correlation for any community that I have seen that shows $X of DCs = $Y or Y% in tax increase/savings. Maybe the report that will be tabled to council goes into this but I haven’t seen any calculations in my research that illustrates at which level a charge is too much or too little and when taxpayers are actually footing the bill. Are taxpayers unwilling to subsidize development at all in order to help Windsor’s overall growth? Would taxpayers be willing to pay $5 more per year in property taxes to cancel the proposed increase in charges and see dozens or hundreds of new homes built? What about $10 or $50?

Broader Impact of DCs

According to the Lincoin Institute:

for every $1.00 of impact fee [their name for development charges] increase, the price of both new and existing housing increased by about $1.60 and the price of land reduced by $1.00.

An argument could be made that higher prices for new and existing homes would not only make owners more well off but at the same time it could potentially increase property tax assessments and in turn help spur growth in the tax base without a property tax increase. Given the fragile nature of the economy of Windsor, artificially inflating home prices by $14,804.80 (assuming the 51% increase on a single family dwelling) could price some people, particularly young people, out of the market. Unfortunately, the authors also point out that in low growth municipalities these impacts would be smaller and more diluted and there is no way to tell what the impacts would be without implementing the changes and observing the results.

This also brings in the question of fairness on existing property holders. Land owners who are seeking development may actually lose out on increasing development charges as the value of their holdings decrease. This could potentially result in them being less likely to sell to developers, further holding up new development. This could also impact the city as any of their holdings that they wish to sell for development could decrease in value or see developers not interested in paying the asking prices, losing revenue for taxpayers.

Where and What Type of Development?

A lot of the discussion revolved around single family homes, but for much of the City of Windsor the large scale development of single family homes isn’t an option. From observation the City’s core and key neighbourhoods are already built up and no new single family developments of significant size could be undertaken without major demolitions occurring. There is space in South Windsor and in the surrounding communities and that is where this kind of development is already occurring. Given the city’s plans for increasing density in the downtown, what are needed in Windsor are condos and apartments.

Unfortunately, council nor developers can dictate to people where they live or in what sort of dwelling. If people demand houses, that is what will be built and developers will build those homes where they can maximize their profits, but maybe we can make it cheaper to put population dense buildings in the city centre. Dense developments (like apartment buildings or condos) require less space to build but are capital intensive to undertake, and take longer to build and be profitable. This is partially why developers tend to be drawn to family home construction. Unless market pressure or urban constraints channel them into other forms of development they will go where they can maximize profits.

Innovation

In my opinion, the discussion of development charge increase is a debate about trying to use a blunt tool to deal with a nuanced issue. Of course growth needs to pay for itself, but when economic/population/construction growth is limited is that the time to raise the fees on this development?

Councilor Holt stated on his Facebook page that he was surprised that people would want to subsidize new residence for $10,000 per unit. Yet both he and Councilor Bortolin have spoken out, quite admirably, about the city “subsidizing” community centres for the broader good of neighbourhoods and the city itself. If the goal of the city is to bring density, walk-ability, and livability to the downtown and other neighbourhoods, subsidizing new development to ensure that residents move back to the core may be in order.

Yes the various CIPs in Windsor do provide development charge relief, but they are constrained geographically and in need of updating with some being drafted in the early to mid 2000s. Although these CIPs are relatively easy to complete, it can delay the development process as it can take time to draft, submit and get approval. Finally, the CIP does little to attract a single family or small scale investor who may want to build a house and settle in a neighbourhood. Wouldn’t it be simpler, fairer, and more cost effective to just make these reductions permanent for these neighbourhoods?

The Smart Growth Report examines 15 types of alternative revenue tools (including DCs) from across North America with “observations on the potential of the 15 tools surveyed to raise money for infrastructure, achieve smart growth outcomes, and be replicated across Canada” being offered. Why can’t another tool beyond DCs be implemented to fund the growth of our city? Can Council come up with an innovative solution that is within their power to implement, that can still attract development while ensuring that the city can pay for its growth?

6 thoughts on “Discussion on Development Charges in #Windsor

  1. I can’t help thinking we need more public discussion around your final two sentences, both of which mention growth. Windsor’s population is exactly what it was in 1970, the physical footprint of the city has expanded significantly, and our business growth rate is stagnant. This is the explanation for the empty spaces and derelict houses closer to the core.

    However, rather than being completely pessimistic about the situation, shouldn’t we be exploring more options for living better in a smaller city?

    Growth as the way forward is the only paradigm most of us have ever known, yet there must be other ways to make Windsor more desirable to live in again.

    • Thanks for the comment, fundamentally growth is the default position for our modern society. To think that a “shrinking city” can be a good thing will require a shift in the mindset of citizens, businesses, government and politicians.

      Additionally shrinkage comes with a price, a smaller city needs fewer employees and services, meaning people need to be willing to give up local amenities (libraries, community centres or bus stops). The flip side is of course, higher taxes.

      Reimagining Windsor as a shrunken city is certainly possible but we are in fact growing. Since 2010 our population has been increasing slowly according to Stats Canada by a few thousands people per year. Unfortunately I see us in limbo, not shrinking enough to justify major contractions, not growing enough to justify a major expansion.

  2. Our population did increase recently, but it was from a depressed level. The following are the census numbers going back to 1971:

    1971 209,300
    1981 192,083
    1986 191,759
    1991 191,435
    1996 197,694
    2001 208,425
    2006 216,473
    2011 210,891

    I agree with you that the future population change, whether it is up or down, will likely not be huge. Of course any service reductions will be hugely unpopular. This is why Council will have to work hard to curb new capital outlays that will come with hefty maintenance costs in future years.

    • I agree that the total population is about the same as 1971 but the overall regional population is drastically different. Tecumseh, LaSalle, Lakeshore etc. have all grown in that period as much of the migration from Windsor to the surrounding bedroom communities. Families have move from smaller apartments and starter homes that dot the city core to the sprawling suburbs and subdivisions that fill the surrounding communities.

      Although they do not pay taxes in Windsor much of that population does play a roll in development and service patterns in the city. Those people travel through the city to work and play which is tracked and included in patterns of usage that the city of Windsor must maintain. As a result, even if Windsor shrinks the region as a whole will still demand certain services; Windsor can’t for example not repair Tecumseh road or EC Row even if our population would shrink by half, the remaining businesses would demand that those thoroughfares were maintained. You only need to look at Detroit to see what drastic population decline can do to a city. Although I wouldn’t think Windsor is in for such a decline as an option population shrinkage in my opinion risks further hamstringing our community rather than strengthening it. The solution is in regional governance but that is another blog post.

      • That is very true. It’s scary to think what the area might look like in 20-30 years. If the other municipalities keep their tax base and development charges low, and keep encouraging sprawl, I’m afraid they might run into financial difficulties when their infrastructure starts to show its age. It’s easy to think that this is one problem that they get to keep for themselves.

        Yet regional amalgamation might be a good idea to increase our tax base and improve cost sharing. But that also means we inherit the legacy of the sprawl generated by the county.

        Perhaps the ideal strategy is to leave the region before things get really ugly.

      • Once things are built, the cost to maintain them is relatively stable, it can be planned for and budgeted and taxed at an appropriate rate. The sprawl in the neighbouring communities is relatively new and has been paid for, assuming that those communities have been doing their due diligence and planning, their tax bases should be sufficient to cover the costs of their own development.

        The fundamental debate that has to be had, is how do we stimulate the appropriate types of growth in the city core. What we need in Windsor is high density growth (apartment buildings, Condo, row houses etc.) that can be built in the limited space of the already developed albeit decaying city centre. As we hear often from politicians we are one project in many cases away from a rival in many aspects. Putting 200 young people downtown in a new high rise would do wonders for the city. The question is whether you can convince developers to build it given the current environment.

        The key part of the development charge debate is is perception, what do people think as people are the ones who decide to spend money. If developers think it will cost them too much money to build in Windsor they won’t build and go somewhere else.

        Thanks for the discussion I am happy to continue it, I will be writing more on development charges and other topics, I hope you will follow me and speak up when I post those blogs as well.

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