Using the Power of the Market to Shape Efficient Urban Growth

Reading recent accounts of Council’s reluctance to endorse, even if only in principle, the City Treasurer’s recommendation to begin the study of an “area rating” system for the calculation of development charges (DCs), I was struck once again by how shallow and unsophisticated deliberations by Council have become.

A fully developed area rating system, a potential tool in the growth management toolkit, would be an approach firmly grounded in the recognition of the power of the market in influencing development and locational choices.  The other pole in the continuum of growth management techniques is, of course, the status quo – the planning regulation approach, which causes so many of our councillors such extreme distress.

Now, to be clear, Mr. Hayward is NOT recommending the study of a fully-developed area rating system.  It is but the first tentative step in that direction. But, with area rating, comes the acknowledgement that DCs should at least attempt to reflect the true cost of providing urban goods and services as they vary with location, land use, building type, density, and proximity to existing urban infrastructure.

With the planning regulation approach, cities, via their planning departments, attempt to shape and manage growth through policies and regulations. 

What both approaches have in common is the acceptance that, within the urban growth boundary at least, there are MORE efficient and LESS efficient places in which to grow our city, and that this growth needs to be properly staged in order to make it affordable for taxpayers.  As has been said elsewhere, “Growth is good, but not all growth is equal.”

We can try to drive growth to the more efficient places and away from the less efficient places by trying to regulate where it can occur, or by using the power of the market to send the appropriate price signals to accomplish the same goal.

People who know me will understand that I don’t, generally, have great difficulty accepting the use of regulatory means to accomplish sound public policy outcomes.  Accommodating the future growth that is absolutely necessary for the future prosperity of this city within a more strategically-determined and compact urban footprint – with all of the economic, social and economic efficiencies this will bring – fits within the parameters of “sound public policy”, at least in my mind.

Readers are well-advised to review the ReThink London discussion paper on a compact city, in which the costs to taxpayers of three models of growth are costed over the next fifty years.  The costs are truly staggering.  We’re talking billions of dollars.

So, having said that, one would expect that I would be firmly on the side of the planning regulation approach (let’s regulate our way to future prosperity through urban growth because I don’t trust the market to do what’s right) and, say, someone like Councillor Van Meerbergen would be strongly supportive of market-based approaches (let’s get the planners out of the way and let the market do what it does best).  This is where it gets confusing….

My own views on the most appropriate way for us to efficiently shape urban growth to fit the legitimate needs of this city – that, is regulatory approach vs. market-based approach – are, well, evolving…. 

I say this because I’m having difficulty getting past a simple and increasingly obvious fact:  despite at least twenty-five years during which smart and progressive urban planners (many of whom run the planning departments in large Canadian cities, including ours) have attempted to use increasingly complex planning regulations to shape and manage growth in the ways most affordable to the public purse, things aren’t improving much, if at all.  Sprawl isn’t being contained.  Intensification targets aren’t being met.  Residential and commercial development still leapfrogs.  Prime agricultural land on the fringe of the city are still being consumed by greenfield development.

So, I’m getting closer and closer to Councillor Van Meerbergen’s position that we might have to learn to harness the power of the market to accomplish sound public policy outcomes. Except that Councillor Van Meerbergen has since vacated that position.  He voted against Mr. Hayward’s recommendation to study this market-based approach – along with the Mayor and Councillors Swan, Polhill, Armstrong, Orser, Henderson, D. Brown and White. 

Interesting, no?

 

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Our Councillors Say Some of the Darndest Things

Councillor Brown’s recent off-the-cuff statement on the culpability of the library system in the demise of video rental companies was patently absurd on its face.  Ms. Brown is, I’m sure, at least as bright as the average Londoner, and the average Londoner had no trouble immediately identifying the statement as nonsensical.  I’m confident that Ms. Brown herself regretted the statement as soon as it passed her lips.  As someone who has  committed his own fair share of gaffes in conversations with the local media, I’m probably more sympathetic to Ms. Brown’s plight than most.  Seldom will one be given a “do-over” in these circumstances.

Of course, Ms. Brown is not the only local elected official to make nonsensical statements.  Sometimes, as in Councillor Orser’s musing on chicken diapers as a local economic development initiative, the statements gain traction and generate commentary.  Other times, they don’t.

Far more interesting, I think, are the utterances by council members that are not so easily recognized as nonsensical but are absurd nonetheless.

Take Councillor Van Meerbergen, for example.  I have no real problem with the good councillor.  He represents a particular ideology and significant constituency that deserves to be heard during council deliberations.  But he sometimes says some of the silliest things, and he generally gets a free pass when he does so.

“Only the private sector creates wealth”.  I have heard the councillor make this statement on many occasions during council proceedings, usually as justification for voting against some form of city spending, which he is wonderfully consistent in doing.

But could this really be true?  Is it only the private sector that creates wealth?

Of course it’s not true.

Almost every time that city council rezones a parcel of land, it creates wealth for someone.  Is Tony Graat more wealthy as a result of the recent decision by council to permit the construction of a condominium development on Reservoir Hill? Of course he is. Did he create this additional wealth? Of course he didn’t. [Amended August 18: It has been noted that Mr. Graat will create wealth as the result of his investment in the construction and sale of the development itself, by virtue of the return on the private capital he will be investing in the project.  This is, of course, true.  In this example, I was referring only to the increase in the market value of the land as the result of the single legislative act of up-zoning.]

Almost every time a city extends its Urban Growth Boundary, it puts wealth in the pockets of a few individual landowners due to the increased market value of their lands as potential development sites.

The council decision to designate Old East Village as a Heritage Conservation District on April 10, 2006 increased the wealth of Old East property owners by an average of nearly 5 percent of the market value of their homes, according to an analysis I did at the time, and this was accomplished by the simple proclamation of a single by-law.  We went to bed on April 9th and woke up the next day with several thousand dollars of new wealth.

And these are just a few of the decisions of the local council that create wealth in the local economy.  Any time the public sector converts a public good into a private profit, wealth has been created for someone.  There are more examples, of course, just as there are countless ways that provincial and federal governments create wealth for individuals.  We could talks about tariffs, or legislation that sanctions monopolies, or government subsidies to agriculture or energy producers, or the sale of mining or spectrum rights, or some aspects of monetary policy, or political decisions to selectively enforce certain laws and regulations.

Councillor Van Meerbergen, too, is at least as bright as the average Londoner.  I’m confident he knows that his assertion is a fiction.  But it is a useful fiction in the service of his particular belief system, and it is especially useful if it is not challenged.  Nothing contributes more to the cynical notion of government as a drag on our economic well-being than a widely-shared belief that, in our interactions with governments, we are all losers.

An Open Letter to Council (June 2012)

As our elected representatives, you have asked us, the citizens of London, to become engaged with you in planning the future of our city.  Thousands of us have taken you up on this offer since you took office in 2010, on a wide range of local and city-wide initiatives: the Community Engagement Task Force, the Strengthening Neighbourhood Initiative, the London Homelessness Plan, the SouthWest Area Plan, the SoHo Community Improvement Plan, the McCormick Lands Area Plan, and a number of others.

The latest round of engagement is with ReThink London – the 20-year Official Plan Review.

I have to tell you that I am getting a little cynical about whether you really want us engaged or not.  This is just my opinion, of course, though I suspect that it is an opinion shared by enough people that it should cause you some political discomfort.

I will remain engaged in ReThink London, in spite of my cynicism, because it is important work that will shape the city that London will become long after you have left office, voluntarily or not, and because I remain hopeful that some of you will finally come to understand what “community engagement” really means.  I say “some” because it is clear to me that not all of you will.  Or can.

A good place for each of you to start is with Community Improvement Plans (CIP).  Notice that the first word is “community”, not “council”.

The CIPs come about as the result of long and often complex processes that involve hundreds of citizens in helping to plan their own neighbourhoods, in collaboration with their elected representatives, city staff, developers, service agencies, and so on.  It should be noted, and taken note of by you, that these people are “engaged citizens”, who are highly likely to be in the one-third of Londoners who vote in municipal elections.

Please, cure yourselves of the compulsion to meddle in or micro-manage these Plans.

Not every hare-brained or half-formed thought that comes into your heads needs to be inflicted on us.  Nor is every opinion you have on “new ways of doing planning” worthy of five mind-numbing minutes of blather or bombast.  Stick to your bloody knitting, folks.

If any of you truly believe that CIPS are but a guide for you, to be tossed aside any time your attention is caught by some new, bright and shiny bauble, please have the decency to stand up in your place and say so.  Tell us that your right to tinker trumps our right to participate in the planning of our own neighbourhoods.

Above all, councillors, do this one little thing:  act as if you love this city!

London Councillors support Arva Shirkers

It’s not often I’m left gobsmacked by the actions of Council.  The actions of the members of the Built & Natural Environment Committee LFP story here, at its meeting of August 15, 2011, have left me asking this question:  Exactly whose interests are the committee members serving in this?

The storyline is quite simple:  BNEC has recommended to Council that Arva be allowed to increase its wastewater flow into the city of London system to allow the hamlet to construct another 185 homes, effectively tripling in size.  These 185 homes represent increased assessment for Middlesex Centre in the amount of about $45 million and, given that planning staff feel these homes would have been built within the city limits of London in the absence of sanitary sewer capacity in Arva, the loss to London taxpayers is the property tax that will be paid on this $45 million of new assessment.  Our Mayor’s oft-repeated homily that he can hold property tax increases to zero by increasing assessment growth in the city is only potentially true if the assessment growth happens inside the city.

Residents of Arva pay their property taxes to Middlesex Centre – a fact of which we should hope the members of BNEC are aware. Our Mayor is certainly aware of this.  Arva is where he lives and his property taxes are payable to Middlesex Centre, not the city of London, even though he certainly consumes his fair share of London services.  As does Clr. Henderson, who also lives outside the city and pays his property taxes to Middlesex Centre.

Clr. Swan, who is bright enough to get this, reassures us by touting the benefits of a “shared regional services” model, a concept he surely doesn’t understand. The model, as practiced in other jurisdictions at least, is predicated on the notion that there will be a “win-win” for all the parties involved.  Having London taxpayers subsidize the opportunity for consumers of London services to shirk their responsibility to pay their fair share by living just outside the city boundaries and paying their property taxes to someone else is hardly a “win” for the taxpayers of London.

Where I do agree with Clr. Swan is that the proposal is indeed “innovative”. But the creativity here accrues to Middlesex Mayor Al Edmonston and his peers in selling a proposal to London councillors that fleeces London taxpayers.  Clrs. Swan, Denise Brown, Polhill and White should be ashamed of themselves.  They should have stopped checking their email or playing Solitaire on their desktops long enough to listen to their staff on this one, as the lone dissenting voice, Clr. Baechler, was doing.

Clr. Swan’s feeble attempts to shore up his argument (they would build it anyway, we’re going to get a share of the assessment growth, and so on) are mildly offensive.  The servicing arrangement – yet to be negotiated – MAY include a payment from Middlesex Centre to the city of London equivalent to our development charge rates for water and sewer, and it MAY include a fee based on total wastewater flows to cover operational costs.  It may even capture the full cost of processing this wastewater.  But there is an iron law for pipes in the ground: every pipe has a certain capacity; once it is full, it needs to be either twinned with another pipe or replaced by a bigger pipe.  This type of work is expensive.  Very expensive.  And when these expenses arise, either in the wastewater treatment facility itself or in the pipes running to the facility, it will surely be London taxpayers footing the bill.

Every single gallon of Arva sewage that comes down that pipe displaces a gallon of capacity for London sewage that will, at some point, be generated by houses built in the greenfields in the north end of the city, occupied by persons paying London property taxes.

If Clr. Swan were truly a creative thinker, he would give some thought to the substantial uncharged benefits gained by the legion of shirkers who make a conscious decision to avoid paying their fair share of the London services they consume every day by choosing to live outside of the city, while continuing to work and play in it.  London, like all regional centres, has a fiscal problem that is exacerbated, in some measurable and substantial way, by the daily activities of these shirkers.  When Mayor Joe or Clr. Henderson drive in to work each day at City Hall, (and the same is true for the thousands of other commuters who enter the city each day to work or play), they do so on roads for which they do not have to pay and which they incrementally degrade in their travels.  When they take a shit at their place of employment, we pay for its processing.  When citizens fall through the cracks in the tiny economies of these small towns, when they find themselves homeless or have mental health issues, they come to London, where services are available, paid in some part by London taxpayers, and the economy is large enough to provide opportunities.  When London taxpayers forked out some $30 million to construct the new Oxford St. bridge a few years ago, London taxpayers in the Riverbend community certainly benefitted from easier access into the city proper, but so did thousands of residents of Strathroy, or Komoka, or Mt. Brydges entering the city for work or play.

People should be free to live wherever and however they wish, but they shouldn’t be free to expect others to subsidize their freedom to live where and how they wish.  Freedom isn’t free.

So here’s an idea for Clr. Swan to try on for size.  If he is truly interested in capturing London’s “share” of regional assessment growth, made possible by the heft of the London economy in the local regional economy, let’s look at a municipal income tax.  It’s quite simple, really, and fair to all: a payroll tax (for the sake of this argument, let’s say 5%) based on employment income earned within the city), which is remitted to the City of London and recorded as a credit against the property tax account of each ratepayer, or as a refundable credit for renter-residents.  It is tax-neutral for residents of the city.  For those non-residents who are accessing the city on a regular basis, and anyone who is working in the city but living elsewhere is travelling to the city regularly, it represents a fair share payment for the city services they consume.  They may continue to live where they wish, as they should be free to, but they will no longer be insulated from the financial costs of their locational decisions.

Now, to be fair, I’m just spit-balling here.  There may be other and better ways to do this, but let’s not reward people who avoid their responsibility to pay their fair share by making it easier for them to do so.

October 25 Was a Long Time Ago. It’s Time to Move On!

Much ado has been made recently about the level of political discourse in this city, and there is some justification for this.  In our wired world where everyone has a platform and the opportunity to speak at will and anonymously, we shouldn’t be surprised that public discourse is often banal, sometimes just plain stupid and occasionally malicious.  Talk of adopting a Code of Conduct for citizen members of advisory boards, agencies and commissions to limit freedom of expression is a self-serving diversion, unlikely to have any real impact, and bad policy in any event.

For my part, I would like to speak frankly and clear the air on the great yawning chasm that is assumed to exist between Clr. Orser and myself.  It’s a fiction, and I’m not even sure who I can blame for it.  Characterizations in the local paper that we are “political rivals”, for example, don’t help.  We haven’t been political rivals since election day, and that was a long time ago.  The good people of Ward 4 made their choice on October 25, Clr. Orser won the contest quite handily.  It was over in the early hours of October 26th.  It’s time for everyone to move on.

The plain truth of the matter is that we need him in our corner as we work to improve our neighbourhood.  We need to open the lines of communication.  While he and I are not ever likely to be friends, I would suggest it might be useful if we were able to talk to one another. I’m more than willing.

Now the naysayers will no doubt point to some blog postings of mine where I took the good councillor to task for the single appointment he received to agencies, boards, and commissions.  To those folks I would say that it’s a factual observation that was made on the basis of his commitment to represent the people of Ward 4 “full time”.  It’s not malice or slander, people!  In the same way, I think he ought to have applied to sit on the board of the local B.I.A., that he ought to be much more supportive of their work, and that he ought to attend neighbourhood meetings as our elected representative.  You may disagree with me on any of this, but let’s not try to create trouble where none need exist.  Let’s at least try to separate the fact from the fury!