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PLG710 Notes

Lecture #1
Policy Stream
Intro to policy planning
Municipal finance for planners
- This course is focussed specifically on expanding understanding of policy
Program evaluation and policy analysis
Land value capture
Policy Hierarcy
- Programs
- Projects
- Providing affordable housing for people
- Affordable housing program
- Regent Park social housing
Policy Process
Agenda Setting
Policy Formulation
Policy adoption
Policy implementation
Policy evaluation / analysis
Agenda Setting
The government will consider it, considers alternative ways to affect that issue
Analysis of alternative ways
Policy Adoption
Policy Implementation
Sometimes you might send out regulations but then you might get feedback that it sucks
(like with the Liberals and inclusionary zoning)
You need the right expertise. Like the expertise in house to do a pro forma analysis. If
not the project can fail.
Debt vs Deficit
Debt is a stock, deficit is a flow
- Debt is a stock - so it is measured at a specific time
- Deficit is a flow - so it is measured over a specific time (typically annually)
No sustained federal funding for transportation.
Conditional vs Unconditional
Specific purpose vs general purpose
Municipal Finance
A field of economics
Public finance deals with a lot of the same components of theory, externalities, etc
associated with property markets and economics.
Public Admin
Strategic planning
How the government would operate. This became popular in local government because
of the business model connected to it in
Public can be involved in the process in a number of ways. Like cleaning up along a
Really the responsibility of policy makers and decision makers.
Does not have the same force that land use planning - the latter of which has to be
followed by council. Strategic planning on the otherhand can change with an
Burlington had its first strategic plan in 1988. Future focus plan model in burlington. At
the end of the term of council they do a survey to get public input about where the plan
is. If you don’t have a strategic plan council should get together as a group to see if there
are agreements and disagreements over.
Capital budget
Items that you pay for out of current expenditures or that you can borrow money on.
Land Value Capture
- Regent Park example, how to you leverage public assets
- Joint development - if you buy the land before prices go up. If you can buy that land
beforehand you can capture the value increase for the public sector instead of the
private sector.
- Business taxes
- Assessment of properties rules. The rule is not the current use value of the
property, but the highest investors. Why? Change the policy.
What determines prices? Supply or Demand?
- Both are important to understand
Supply Curve
Upward sloping, reflects greater supply
The supply curve for any good or service are the factors of production
- Factors of production are
- Land
- Labour
- Capital
- Prices or availability of these factors will determine the pricing for a good or
Demand side/curve
Demand curves tend to be downward sloping
- Higher prices less will be demands, lower prices more will be demanded
You can look at individual demand curves or market demand curves.
Factors that affect demand curve
- Individual
- People’s incomes
- People’s tastes and preferences
- Price of alternatives or subsititutes
Lecture #2
Next week Craig
Assignment will be put up today, course outline as well.
2) Assignment - D2L
Briefing note
IMIT - tax excemption if in community improvement area
Could be a paragraph based on what you want to do
Development charges - what should it be used for?
3) Current events
Housing sector is something that is very important, driver of our economy. If it's doing well there
are a lot of spillover effects into other industries.
Recent policies that affect housing prices.
Provincial fair housing policy
stress test mortgages
interest rates
foreign buyers tax
- Debate about the impact of this one
Keep in mind that the impact of these policies was felt initially in terms of prices, but
since then things have gone back to normal.
- Hamilton LRT, uploading subway to province, should the federal government be involved
in transit construction.
- Smart Track
- Before Tory’s smart track we had Rob Ford’s one stop subway. Before that we
had Miller's transit city. Each mayor has a new plan.
Inclusionary zoning: Either required or incentive based
The question is how do you define the affordable units, how are units are
Urban land institute had an article on this, talked about how you can have a few years
with deeper subsidy or more years with a less deep subsidy.
4) Fiscal model
What do you think is important and why? What to do with the budgeting process
Property tax (assessment multiplied by tax rate)
- Assessment done by provincial agency. Tax rate is set by council.
Grand Transfer
- Federal and provincial transfers.
Other revenue (user charges, fines, miscellaneous revenue)
Business improvement tax
Own source revenue
Total expenses
- Workers? salaries
- Planning
- social
- parks and rec
- roads and transit
- sewer and water
- protection services (police, fire)
5) Institutional setting
At one point in Ontario history there was different structures that were required to match
grants, based on city/town size
School boards
- Can raise property taxes as well
- When we look at the tax rate that is applied to the assessment for properties, the
taxes are collected by the local municipality.
Lower tier
- Collect taxes for the local government, region, and the school board.
- With the reforms of 20 years ago the province took over the residential charges.
Agencies, boards, and commissions.
- Police board, TTC, all these things come into play. Get rolled into big budget
- Not like a region. Typically they have limited responsibilities.
There was some rational for how cities are structured
Today with a subdivision the developer has to provide many of the services. Back in
1953 the local government had to borrow money to pay for it.
- Rich tax base of non-residential properties was in Toronto
- Part of the rationale for creating metro Toronto was to simplify this tax base.
Regional governments
- Having economies of scale allows you to lower the cost per unit, so they were
responsible for sewer water and regional roads. began to rationalize efficiency
based on economic principles.
Provincial conservatives in the 1990’s
- Reduced number of municipalities/regional/county governments from 870 to 360.
1998 reform
- amalgamation of various municipalities
- property tax reform
- local services realignment
- downloading
Evaluation/analysis of policy
Redistribute impacts (costs/benefits)
- who gains?
- who loses?
Economic functions of government
6) Urban Public Economy
Public goods
Tebout hypothesis
Income differentials
Economic Functions of Government
Efficient allocation of resources
(re) distribution of income
stabilization policy (interest rates, unemployment, balance of trade)
If you have a book on municipal finance these would be described as functions of
government, especially for Provincial and federal governments.
Question is what policies are appropriate for municipal governments.
- Efficient allocation of resources: every day municipal services (lights late at night,
etc) are taken granted by people
- Redistribution of income: Could involve the way taxes are structured or the way
services are provided.
- Stabilization police: (interest rates, unemployment, balance of trade).
- Local economic development, matching residential employment uses.
Economic development is trying to attract new industries and maintain
and care for what you have.
- Greater Toronto market alliance. Go to trade shows, market entire region
at trade shows around the world, then when they get here we can point
them to particular cities. Much more efficient from a economic alliance.
The concept was good but it didn’t attract much.
- How do we allocate private sector development coming through
Progressive taxes = the more money the make the more you pay. Use a progressive tax
base to pay for services for people that need it.
Taxes can be regressive. A regressive tax is one that has greater burdens on lower
income people.
- regressive can be related to income or to total wealth
Own source income is basically a property tax. Property tax is regressive. So you don’t
want to use regressive tax to redistribute income.
Public goods: Goods or services that are provided by governments because either they will not
be provided by the private market or they will not be provided by the private market in adequate
quantities. This is because there is some kind of market not functioning. It's an example of
market failure. This has two characteristics.
Non-rivalous of consumption:
Economists argue that when you set prices you set it to the marginal cost. Providing it to an
extra person however might not cost anything. An example would be national defence. Justice
system, police protection, examples of a pure public good. Lighthouse is another example.
Market fails because one person consuming it doesn’t mean someone else can consume it.
In a local government setting this is true for certain things up to certain points. A public park
would be an example, up until it becomes congested.
Quasi public goods (services): Private sector wouldn’t provide enough of them .
Demography: Baby boomer generation had a lot of people, means they are all at the top. Next
up is the echo boomers and the millenials.
Tiebout Hypothesis
If you had a large number of municipalities, that each has a different service and tax
package, that this may lead to an efficient allocation of resources
- people would choose and move to those municipalities that had the tax and
service package that most clearly met their preferences.
- Votee with your feet
It has had little take up in Canada, bigger in the US
People don’t vote because of tax and service packages. Instead they get married, get a
new job, have kids. Once they choose to move then they may decide where they are
going to move and look at services and tax rates.
External costs or benefits that arise in the production or consumption process
- producers
- consumers
Externality of road congestion
- impacts on individuals because of time, gas usage,
- two kinds of externalities can occur.
- negative and positive
- shade in the backyard, prevents sunny and enjoyable place to live.
- Subways and railways can have vibrations that have negative externalities.
- Zoning game by Richard Babcock that goes and looks at the theories of zoning.
- property value theory of zoning
- planning theory of zoning
A lot of the early zoning bylaws reflect Canada’s historic view on planning. it goes back to trying
to minimize externalities.
Zone properties together to minimize impacts on other areas (like residential areas).
Lecture #3
When development occurs in a municipality that means you are getting new households,
new employment space and new employees. This means an increased demand for city
Long history of development community funding new infrastructure, cities services
Rapid growth after WW2, municipal infrastructure funded
Cuts in the 1960’s towards federal funding in infrastructure
The 1990’s the download
Provincial government throughout Canada began to shift service delivery to
Limited new revenue-raising tools provided to municipalities
Many provinces enacted “development charges” legislation.
- formalize municipal authority to collect capital contributions
Ways to Finance Growth-related municipal infrastructure
Property taxes
- property taxes are reliable, whereas sales taxes vary by how well the economy is
doing. In the US they rely too much on sales taxes and non-property taxes, which
is part of the reason you hear about municipalities going bankrupt.
- Property taxes are primary source for taxes
utility rates (water and wastewater)
Federal and Provincial grants
User fees
Developers - local services (initial round capital only)
Development charges (initial round capital only)
Funding Growth-Related Infrastructure: Property taxes (and Utility Rates)
Arguments For property taxes
Large base from which to recover
Municipalities have reasonable autonomy to set rates
Growth benefits the existing community by providing new housing, new jobs, new
taxation, etc
Arguments against property taxes
Equity - why should existing community pay for infrastructure related to new growth
Property tax is also primarily a tool for funding operating costs and capital replacement,
so very little tax room is left for new infrastructure.
Funding Growth-Related Infrastructure: Federal and Provincial Grants
Arguments FOR
Reduce tax impact on local community
important in rural/northern communities with limited growth
some infrastructure costs (i.e.transit) are so large that it would be cost-prohibitive to
solely use other methods
“Merit goods”
Arguments Against
Often variable from year to year (except gas tax)
Geographic equity - why should one community get a grant and not another
Restrictions on where/how/when money can be spent
money could be better used for other purposes - i.e. health and education.
Funding Growth-Related Infrastructure: Debt
Arguments for
Infrastructure projects can start quickly
Borrowing rates have been favorable as late
Arguments against
not really a funding source but rather a way of funding
equity - non-benefiting groups may help pay off debt
can limit future borrowing opportunities and rescue credit rating of municipality.
Funding Growth-Related Infrastructure: User Fees
Arguments FOR
Benefiting users pay
Can be used in conjunction with Public-Private Partnerships, e.g. Bridges at border
Arguments AGAINST
Takes a long time to pay back capital costs
Politically difficult, e.g. Road tolls
Very little tax room, e.g. Often used to fund operation costs
Funding Growth-Related Infrastructure: Local Services
Arguments FOR
Benefitting user (developer) pays and builds to municipal standards
Municipality does not have to worry about cost increases
What are Development Charges?
Fees imposed on new development to finance “development-related” capital costs
Overview of Canadian Legislation
Most provinces allow for the levying of municipal charges.
Ontario has the most broad number of things it can fund, but Alberta has a very limited
number of services it can fund.
Funding through these charges means less of a demand on property taxes funding
Development charges are not specific to a type of development
Development Related Costs
Most development charges have no impact on the viability of properties
Drivers for Halifax Services
Fire services want to be able to get a vehicle to a place in a given amount of time
Library have their own
- Massive amounts of development have been allowed to occur without private
greenspace. We should have countered that by making Trinity Bellwoods sized parks.
We have failed with our ability to counter density with access to these spaces.
- Markham centre - developers tried to argue that they did not have to pay development
charges for building recreational facilities because their owners would just use their own
gym. A survey however was done by postal code that showed that they actually used it
more often than others.
Ontario Development Charges Act, 1997
A background study and public process are required
A by-law must be enacted (maximum life is five years)
Restriction on services that can be included and the level of Growth-Related capital
costs recovered
Charges can be municipal wide and area specific
dedicated reserve funds are required
credit and front-end ING agreements are permitted
charges can be levied on residential and non-residential land
companion act legislate school board charges
Restriction on capital goods
- Computers excluded and vehicles with a useful life less than seven years
Intensification exemptions
charges restricted to ten-year historic service level averages.
2015/2016 Amendments to the DCA and Associated Regulations
Cultural and entertainment facilities, including museums, theatres, and art galleries
(taken out because development industry lobbied to remove it after having to put in arts
facilities in mississauga centre and in markham)
Tourism facilities including convention centres
parkland acquisition
headquarters for general administration of municipalities and local boards
Landfill sites and solid waste incineration facilities.
Overview of the DCA
Eligible services: 100% cost recovery
What do DCs Fund?
- There is a question of whether or not increasing DC’s would change the price
developer's sell a unit for. The prof says not. I find that hard to believe.
Lecture #4
Current Events
subways in toronto
- City can’t afford to build subway further by itself
- could be good, for this reason, could be bad because city loses autonomy
real estate access to online data now
- could let people know what others are paying.
public sector accounting
- municipalities have their own accounting standards they are required to use,
province has other ones.
Urban Public Economy
Production -> Consumption
Divergence between private and social costs (negative externality)
Divergence between private and social benefits (positive externality)
So you can have negative and positive externalities
Supply and demand charge
- Supply side reflects price of factor to produce it (land, labour, capital)
- This model treats water as free it isn’t priced. If you did take the cost of the
pollution into account, what is the cost of pollution and where does the curve
move now?
- How do you adjust for this particular externality?
Policy Tools
Expenditures/subsidies = external benefit
Behavior modification (like teaching kids to recycle)
Who gains? who loses?
Income Differential
Physical capacity of municipalities
- Own source revenue
- Property tax and user charges
Residential/non-residential, 60%/40% mix could be ideal.
- Gives you a mix of employment and having enough space for people to live. Also
want to minimize distance for people for where they have employment.
- Municipality A may be providing library services, other services, but municipality
B might have people coming in to use their library. Municipality A might block and
non-residents from using their facilities. Or they may charge them to buy a library
card or use their recreational facilities.
- The provinces then may say “we don’t want to impose additional costs on
residents in area B, so we will give a subsidy so that they can enjoy the
same service standard.
- Join servicing agreement is also an option. Every time someone comes to your
municipality to help (for like a fire) you pay for it.
Designing Government
Four considerations
Economies of Scale
Distributive argument
Demand issues.
- Tiebout hypothesis
5. Political considerations
- Should we have larger wards, different form
- 1970 we had Toronto Centre Region Plan
- In 1990 we had a number of liberal initiatives with what should happen to
the region of Toronto
- Coming into 1990 there was a recognition that metropolitan Toronto was
not growing significantly. The 905 was growing significantly. At that point
the liberal government put forward some background studies about what
they should do about this. They came up with this document showing
what the issues were and what needed to be addressed.
- Ndp came in after 1990’s studies, we had then the golden task force. In
1996 their report came out. Their report came out at a time when they
had not finished their work. Before they completed their last piece of work
the PC’s came in, let her complete some of the study but it never tackled
municipal structure.
- Pearson Airport - land expropriated by Provincial government. Seaton
communities. Trying to pull the growth in that direction.
- The other lesson is that we have high servicing costs. We no longer have
federal funding, so funding comes back to municipalities. Failure on the
part of senior governments to provide funding.
- In 1998 Smart Growth started in the US. PC’s picked it up.
- In the US a movement in the early 1990’s was growth management,
which had high regulatory control. In the late 1990’s it became smart
growth. It was coined in maryland.
- Not a pure regulation, but let's give you money to municipalities
- incentive based planning but try to improve the environment and
affordable housing.
Political Economy View
Local Government Finance Reform 1998
Three major reforms
1. Reduction of municipalities/amalgamation
2. local services realignment (downloading)
3. property tax reform
Reduction of municipalities/amalgamation
- Prior to this initiative, there were 871 municipalities in Ontario. They reduced that
to around 360 (at least that is how it is today)
- Some made sense since it was going to allow for better economy of scales.
especially in Northern ontario
- Controversial ones though. Kingston, Hamilton, and Toronto.
- In some ways they took ideas from the 1996 golden task force and implemented
- We don’t know the impact of the amalgamation in Toronto, financially, only for
specific services but not for the whole of the city.
Local services realignment (aka downloading)
- Changing the responsibilities of the local municipality or the province.
- Smith committee report 1967
- 1991 report, association of municipalities of ontario
- Joint report on how to revise the system.
- Prior to this reform they had a document that came out every year.
- Transit, social housing downloading.
Property tax reform
- combination of the York region tax rate and Richmond Hill tax rate, as well as
York region school tax rate. A big chunk is the school board tax base.
- They didn’t take into account existing social or transit, so for Toronto it hit us
- You are putting social housing on property taxes. This is a regressive tax on a
progressive policy.
- Province provided Transition grants for 3 year period to minimize impact on
municipalities. Every mayor has been behind ever since.
Determination of Property Values
Tax principle
1. Ability to pay
2. benefit principle
There are more classes of properties that are accessed, single, multi-family, retail,
commercial, vacant, farm, etc.
Three types of inequities that exist for properties
- There may be inequities within the class of a property.
- Some single family properties could be accessed at 4% o f market value,
others might be at 18% of market value.
- There are inequities across classes of property
- Across jurisdictions
Smith report suggested that province take over assessment system. Prior to 1970 when
they did, each municipality had its own accessors. They were supposed to be doing all
the same, but each was very different.
Assessments based on 1946 values, despite it being 20+ years after that
Accessors wanted to make sure they captured as much property tax as they could.
System wasn’t transparent, people were under paying and overpaying. Province would
take over assessment function and would access all properties at market value.
Assessments were creating more inequities, it was chaotic and inequal.
Reform proposed taxes would be applies to 50% of residential property values, but
100% on non-residential values.
- Toronto had huge backlash to this. The redistribute impacts of this in Toronto
would be huge, since it would raise property taxes on single family properties
(since the city of Toronto at the time had a lot of multi-residential homes)
- 1977 Blair commission report on how to change the earlier reform to change the
impact it would have on properties.
- This got nowhere either, there was a lot of infighting and couldn’t make a
- Early 1980’s, when nothing had happened in 10 years, they needed a reform
because the inequalities were only getting worse.
- Many government officials left the government, helped companies that were
being overassessed. Places were beginning to lose their non-residential tax
Early 1980’s reform was Reassessment by property class
- Data given to municipalities so that they could reassess properties so they were
average of their class.
- What happens is the same total amount of money would be collected to
each class.
- Local politicians didn’t want to take the flak for higher taxes. 70-80% of
municipalities did however impose this reform, but Toronto never did. So
over time the inequities were worst in Toronto because of this.
- After a few studies the province had “taxing matters” in 1985, further
studies in 1993, but no reform occurred until 1998.
Lecture #5
Current Issues
Sidelabs Google/Alphabet
- Privacy VS economic development
Transit development
Fiscal situation in Toronto
Property values
Revenues (own source revenues)
- Property tax
- User charge
- Grants and transfers
Market demand drives prices. Agricultural land value depends on the crops it produces. If wheat
prices fall there is going to be less demand for land that can produce it.
Sprawl has always been here. In medieval times sprawl was development outside of the city
Demand for land is derived demand. Residential land has higher return than employment lands,
so it has a higher pricepoint.
Each parcel of land has a ceiling price and a floor price. The floor price is the minimum the
owner will accept, the ceiling is the maximum the buyer will pay.
Revenue - Operating Costs = Net Operating Income
Ceiling Price = Sigma symbol (n on top, Revenue - Operating costs
Ceiling Revenue - Operating Costs = ?
Ceiling price represents net economic value of income stream. Real estate uses this to appraise
the value of a property.
Core area plan City of Toronto - Restriction placed on zoning approvals over 45 feet. With fewer
floors the ceiling price went down because the value of the property went down.
If you slapped a heavy inclusionary zoning cost on condos you will see more foreclosures of
Property tax = assessment * tax rate
More tax incentive to use vacant land. You still are getting taxed for having it, so you might as
well use it.
Taxation based on
benefit principle
ability to pay
Carrying charge = the cost of holding onto property that is vacant or not getting any rent money.
Changes in 1998 meant to address unfair burdens
- between the same properties
- in the same districts
- but did not address inequalities between districts
Site value assessment ?
Unit value assessment
Current value
New reform system (1998)
Property Class
Residential/farm house
Multiple family residential
managed forests
5 optional classes
1) New multi-ress properties (rental only)
Transition ratios
1. Res
2. Multi res
3. commercial
4. industrial
Know what net present values are
Tax burden over time
Incidence of the property tax
- tax incidence = who bears the burden
- Property taxes
- development charges
“Circuit Breakers”
Low income people
PILS (Payment in lieu of taxes)
Local governments cannot impose taxes on senior governments
Senior levels of government instead give them payments in lieu of taxation.
90 minutes
Short answer
Institutional section
urban public economy
- externalities, public goods, etc
Model of public finance, public policy, and admin
- Overview of components
development charges
- Lecture on this from a guest presenter
urban reform
- 1998 and amalgamation
- local services realignment
- property tax reform
Determination of property values
property tax (in more detail)
Lecture #6
1) Property Tax
2) User Charges
a) Other revenue/interest
3) Grants/Transfers
Two types of budgets
- Operating (Current)
- Capital
Principle Taxation
- Ability to pay
- Benefits
User Charges
Benefit principle
Benefits of User charges
Generates Revenue
- Broader range of services in some situations
Rations use of services. People will take things for free, but don't want to pay for
something. Creates more demand for the service.
- Example of an apartment building. If there was one meter and they split the rate
up with everyone equally, people would use more. The professor said that two
buildings were compared (one with split up equally hydro and one with individual
unit charges, the individual unit model used up 40% less power)
Provides price signals
1) Service fees
2) public prices
Set the prices a bit below what the private sector offers. You can set prices as a
comparative to what the market would price it at.
An example would be municipally owned golf courses.
3) special benefit charges
Special Assessments
Local Improvement Charges
- There were streets in North York where they didn't put sidewalks or storm water
on pipes when they developed it.
- People overtime wanted city services like sidewalks.
- Provision in Provincial acts that allows citizens to demand these improvements.
So the city can pay for this with bonds. Looking at it from a benefit basis.
- Average cost VS marginal cost
Development charges (DC)
- Special benefit charge for specific services
- Regressive
- Per capita cost x average number of people per unit
Area specific charges
- different fees based on different areas
Both - full cost pricing
This relates to the public prices and special benefits charges mentioned earlier
Congestion Charge VS Road Toll
Road toll is user fee, based on distance travelled
Tory talked about road tolls on the DVP, but council wasn't sure what they wanted it to
be used for. Tory wanted transit, others wanted affordable housing.
Road Congestion is a regional problem. What you need is regional Congestion charges.
Time (Peak charges)
- time inzone
fed and Provincial local
Smith committee report from 1976 started property tax reform, made recommendations
for reforming grant system
Rationales for grants
1) correcting misallocation of resources
2) close the fiscal gap
3) reducing the despair ties (level of services, costs of providing it)
a) Making sure everyone has equal access to education for example.
4) Political rationals
Capital or operating grants
1) Unconditional (General purpose)
2) Conditional grants
a) Service is provided
b) matching (% province, % municipal)
DC act 89-90
Education DC’s
- Ed DC's - 75% capital costs (he also put 66% on the board)
- There was a court case involving this that was won.
- Look at piece from UN by Ian slack
Operating Budget
Municipalities will delay until March on their budget because the province doesn't start
their fiscal year until April 1st. Also they need to know what property tax increase the
school boards are looking at doing.
Objectives of Budgeting
1) to provide financial control
2) to provide information for efficient management decisions
3) to improve program and financial planning
Budget technologies (or formats)
1) Line item budgeting
Very hard to tell what department you are looking at if you don't know its names. Except
2) Performance budgeting
3) Program budgeting
Example: Program fire prevention
Description of the program
objective of it
financial (budget 2018, actual budget 2018, budget 2019)
Performance measures
efficiency effectiveness
Councilors need to be informed about the budget. Description of the program is
necessary, what it's purpose is.
Some objectives to what the program is trying to achieve.
4) Planning, Programming, and Budgeting System (PPBS)
5) Zero based budgeting
Zero based budgeting is not good financial management. Often pushed by management
consultant firms. It's not very time efficient.
Inputs and outputs
Strategic Planning
Action Plan
- Program
- Goes into the operating budget
- Project
- How to implement it? Put it somewhere in the capital budget
- Some things are short term, intermediate, or long term. Bridge might take 5
years, other projects might take longer.
Budget amount VS Actual Expenditure
Budget Process
1) Guidelines - specific
2) Preliminary estimates
3) Consolidation analysis
a) What is the impact on property tax rate, service levels?
4) Political review?
5) Revised estimates
6) Consolidation and revised estimate
a) Budget committee
7) Political Analysis and Approval
Informing politicians about what priorities are, giving feedback
Lecture #7
Russell Matthew's from Hemson - Guest lecturer next week
Today we'll talk about
Operating budget
- Performance measures
Capital budget
Land value captures (tools)
Operating Budget Budget
1 multi-year forecast
more discrete items
- one or two items per department
- more detail in budget
Link to OB +CB
- Timing (before budget year begins
- Debt service impacts
- Linked together, also in terms of regulation
- Regulations to capture
- Maintenance and Staff costs
Capital Budget
Each department has a request for a budget. To be paid year to year.
Sources of Capital Funding
Current Budget
Grants/Transfers (province/feds)
Reserves/Reserve Funds
Political game played as well, because changing governments mean changing grant access
Performance measures
Two kinds
- Measures of Efficiency
- Measures of Effectiveness
Number of years ago the province came out with the municipal measurement
performance program
- 35
Lecture #8
Planning, Economics, and Finance: Squaring a Circle
We discussed
- Conflict of planning VS economics and finance
- Residential growth patterns: how much change is possible?
- Employment growth.
Basic conflict: Planning goals VS economics and finance
- Planning is a market intervention to change physical, social, and economic
- in a market economy, new development - physical change operates on economic
- Somebody has to want to buy something, be willing to sell something.
That is how development occurs.
- public finances are (usually) based on sound investments and efficient spending
of scarce funds.
How was conflict managed in the past?
There WA not much conflict...planning facilitated growth and development while
achieving broadly supported public goals
market forces were harnessed and directed to achieve planning goals
public works were as sound investments with a high spending priority
What changed
Planning is increasingly doctrinaire
public goals are much narrower
market forces have become an enemy
- Agricultural land becoming a thing that we refuse to lose. 1/3 of the land that was
one Agricultural is now forest.
public spending priorities have moved away from things that matter most to planners
- move from most money in budget spent on new infrastructure in 1960's, to today
when most is spent on health.
public funds are seen to have grown increasingly scarce
Where is planning headed and how do we find a new balance?
Need to consider current planning goals in the context of
market forces - the “Market is us” after all
asking “how are we going to pay for this?”
- Need to ask where this is going and How we will pay for it
Residential Growth: How much change is possible?
While the goals are broad based, the real basis of the Growth Plan is:
- Density is a virtue and can solve most other problems
- Density is achieved by getting far more households to live in apartments
- people will occupy apartments if policy makes all other forms of housing too
Demographic and economic forces are working against these changes
housing choices are tied to family status and age
Divorce happens early in a marriage or when the kids grow up and leave.
People don't move into single apartments until their late 80's. After their spouse is dead.
Baby boomers started in 1950's, peak boom happened in 1959 to 1960,
Will not be saved by baby boomers aging (until the 2040's) or the desires of their
millennial children
- Key challenge to changing built form is that family households will predominantly
be single family. Seniors don't want to leave until they are very old.
How does municipal finance deal with these plans?
Sound financial planning needs to be based on believable development scenarios
But the growth plan is the law...for the moment
and if we don't plan for it then for certain it will never happen
But what if we borrow money and build infrastructure that is not used and not paid for by
Employment Growth Patterns are far more difficult to change
urban development forms are typically quite efficient for what people do for a living and
when places were built
- Quite different things can be done in very different environments. It comes down
to whether or not they are being done efficiently for what they are doing. It
doesn't mean more density necessarily.
Use and density of employment lands dictate by industrial-oriented economic base of GTAH
Notwithstanding a shift away from manufacturing, long-term expectations for GTAH
economy are still sound.
Use and density of employment land dictated by specific needs of each user
Use and density of employment land dictated by specific needs of each user
- No economic basis to assume wide-spread employment intensification
- Current built forms are already efficient investments for the user
- Employment density (according to the lecturer) isn't that important or is specific for the
industry. It's going to be dependent on the industry, so agriculture has low density. Also
with automation factories will have less of it.
Employment development is very troubling for municipal finance
- Growth plan says employment density is good
- actual employment densities are declining in some areas due to greater efficiency and
economic change
- unlike residential, planning has little ability to effect change
- DC rates depend on density assumption: should the charge be based on actual or
- Accelerated shift to denser office-based employment has affected revenue.
Transportation is costly, but much is based on myth
Growth plan and metrolinx based on most new trips occurring on transit
- Transportation infrastructure is being used to make people live in a certain way,
change urban form.
enormous public investment is required
in a reversal of usual pattern; the infrastructure is being used to dictate the urban form
basis of relationships and financing partly based on myths
Myth 1: Automobile use is some kind of irrational “love affair”
When people have the ability to access things they really like it a lot
Hanoi in 1989 was mostly electric bicycles. People really liked it because it gave them
Cars are a great thing because it gives you accessibility that you otherwise wouldn't
Myth 2: Transit is capable of serving all types of trips in all locations
Go Transit “pays for its operating costs through the fare box (it doesn't its like 75%)
Very successful commuter rail system (not really it barely moves anyone compared to
the TTC)
Getting groceries, picking up kids from hockey practice, etc. You can't do nearly as much
on transit as easily as you can with a car.
Myth 3: Land use planning significantly affects transportation choices.
where they are going, convenience of the service, more important than land use or built
Myth 4: Choices will change because they “must” change
Population density
- Biggest difference in population is as a result of the edges of a city, not the
centre. Huge areas of low density in a place like New York outside of the main
city (in places like New Jersey).
- Los Angelo's you can't do rural development. So everything is built on urban
density, a bunch of low rise apartments (not many high residential apartments).
Transportation is the most challenging urban infrastructure for finances
Unlike water and sewer or human services, transportation is highly locaiotn specific
location and mode choices basis of investments
Current choices assume broad societal change occurring very quickly
Magnet for often misplaced political interference
recipe for extremely high-risk investments.
How do we Square the circle?
There will be many fights and a few bad investments
planners need to better understand and appreciate the planning-economics-finance
financial analysis and decision making needs to better understand what planning can
really deliver
but, this is ontario, after all;; we are prone to grand plans but are much conservative with
Lecture #9
Current issues
Land value capture
Sec 37
Land leasing
Fall economic update
- Transportation, housing, some of the things they talk about.
- Talking about uploading subway responsibilities to the province
- Housing supply action plan.
- Rent control and its impact on rental properties. Will removing it help build
- growing pains VS fundamental flaws with LPAT
Land Value Capture
Methods to capture “unearned increments”
Theory underlying “unearned increments” identified by neoclassical economist David
Value increases in land because of market conditions (because of land increasing) or
because of government investments or permissions for approval.
- So not from something the owner has done.
Should the land value increase be captured to fund new infrastructure.
Overview of the tools
Betterment taxes
special taxes/assessments
tax incremental financing
development charges
density bonuses
transfer of development rights
public land leasing
joint development; PPP
Betterment taxes
- Taxes on gains in land values go back to middle ages in 1427
Special taxes/assessments
Property tax (Site value” taxation
Land speculation tax (Ontario 1970s)
local improvement charges
property tax surcharge in benefiting zones
special area assessments
TIF Tools
Broad US Applications
- 48 States since 1952 (starting in California)
- Has been scaled back from California, but was viewed through the lense
of economic development
- Chicago is another prime example
Canadian Applications
- Ontario: TIEG and TIF (2006 Act)
- Alberta: Community Revitalization Levy
- Winnipeg: small TIF initiative
Core elements of TIF
a defined TIF district
Assessed value increases with TIF
TIF Preconditions
There is a requirement for enabling legislation
- State legislation in the US
- Provincial legislation in Canada
There may also be the same requirement for municipal ordinance or by law
there must be positive/favorable market conditions
the objectives
Province of Ontario (Toronto) Example
Provincial background study; west donlands
Tax incremental equivalent Grant (TIEG)
referred to as TIF light despite different legislation and applications
legal basis in the Ontario planning act (section 28)
requires a community improvement plan
brownfield sites: supports remiediation/redevelopment
- erase: Program City of Hamilton
Encourage commercial development
- IMMIT program: City of Toronto
10 year benefit period
- First year they get 90% back in first year, but only 10% back in last year
direct financial benefits to property owners
- Tif is where government pays money for infrastructure
- TIEG landowner pays for remediation cost, the government slowly pays back the
landowner over time.
IMIT: Imagination, Manufacturing, Innovation, and Technology Program
TIEG application created by the city in 2009 were approved, totaling $556 million in grant
The program was criticized for giving subsidies to property owners
The program was altered in 2018 changing the districts to conform to a new Toronto
Core Plan
The evaluated a group of applications based on the new plan prior to its approval and
applying a controversial “But For” test
Toronto: TIF Funding for Smart Track
2014's mayor's election, candidate John Tory has transit improvements, Smart Track, as
part of political platform
It was in part based on TIF funding for a series of new stations
Tory won't the election and had a “sole sourced” consulting report undertaken for Smart
Track (financing)
A number of political debates, discussions with the regional transit authority resulted in a
modified/scaled down Smart Track
In an effort to move his transit agenda forward prior to the 2018 municipal election, the
city commissioned a consultant to review the 2015 smart track funding report.
Only new development value will be captured, but only part of that will be because other
amounts will be used for new services.
Density Bonuses
- General application. In exchange for increased floor area/height the developer gives
either public benefits “in kind” or cash
North American Applications
Numerous jurisdictions including Chicago (1957) and New York City.
Density bonuses first proposed in 1959 to encourage design standards
First policy introduced in 1964 and revised in 1970 to reinforce the contributions for
community benefits
in the mid 1970s the “Core Area Plan” stressed social benefits including “Assisted”
housing which was then
In 1983 the Ontario Planning Act provided legislative authority for municipalities to grant
height and density bonsues
there were three major applications in Toronto in the 1980’s
- scotia plaza
- Jack Layton was able to convince the developers to give $1 million to
public housing instead of having to go through an OMB hearing.
- bce place
- bay Adelaide centre
Toronto (Section 37) Progress
requests made by the developer
city real estate estimates the range of uplift values, geographic specific
planner should capture 15-20% of the increased value, prepares and circulates a report
for the project
Planner and developer negotiate the value
the councilor becomes involved to determine the benefits needed in the ward
Amenities Requested
Determined by staff based on guidelines
Approved by council
Amenities must be growth related and related to the rezone site
They include: park space, libraries, childcare facilities, communities centres,
transportation service, cultural facilities, and neighbourhood houses
Linkage Fees
Essentially a density bonus applied to commercial development to provide affordable
based on the principle that commercial development creates a number of relatively low
wage clerical jobs and these workers need affordable housing.
What are Transfer development rights (TDR)?
a market based policy or technique that transfers development rights.
When you buy a right of land you have mineral rights.
Central Station in New York, huge transfer of air rights. Landmark case.
Transfer density from downtown to other areas like Scarborough centre
North American Applications
New York
San Francisco
- Ryerson transfered Air rights in exchange for access to the theatre for
- Some churches have done the same for residential developments.
Public Land Leasing
Issues and Applications
- Maintains land in public sector, controls development/built form
- raises revenue and captures value
Examples and potential
- Boston MassPort lands, Silver line Station to airport
- Potential TTC surprpluse lands,
- Toronto, Waterfront
- Go Parking lands
York University sold off lands for residential use that they could have leased out for 5070 years and still had then.
Join development approaches
to build stations and facilities
use of private/public partnerships
use of land leases
development using air rights
regent park/north Toronto collegiate type approaches
- regent park was done and is being used as an example for other TCHC
regeneration projects
Final Lecture
Current issues
Land value capture
Fiscal impact analysis
end of term - exam format
inclusionary zoning (housing)
1) mandatory
2) incentive based
Inclusionary zoning is much more complex than what gets reported in the media. The
municipalities thought they wouldn't have to contribute many housing and the private sector
would just build the housing. This wasn't realistic. Most municipalities don't have the expertise to
do the analysis of the viability of inclusionary zoning.
We don't have it coming into place.
Section 37 - we have this but it is largely used for community improvements.
The secondary plan for the waterfront in Toronto however does state that all the section 37
money should be used for affordable housing. It can be taken in kind (either owner occupied or
rent) or in cash.
This is actually working.
Hind/Tridel Building on Waterfront.
- owner occupied, artscape? took over units and it's working
four door. In these buildings there is segregation between those that are the market units
and the affordable units. So different exits and entrances.
Regulation on inclusionary zoning
could be successful here but it depends on whether or not it has any legs
Understanding this will be important for the final exam
He will put up a few documents on the economics on inclusionary zoning on the final
Land Value Capture
Public Private Partnerships
Toronto Examples:
North Toronto Collegiate: School Site
TCHC, Rgent Park: Social Housing
School: North Toronto Collegiate
Developer buildings condos on a school site
School Board gets new state of the art school
Community obtains benefits
School got almost 170,000 square feet (plus additional classrooms)
Regent Park Case
One of the first urban renewal/public housing projects in Canada (1950)
Belief that the physical form was the problem. That by destroying the slums it would
solve employment issues.
69 acres
121,5000 people
TCHC stats
Average household income 14,000
average length of tenancy just under 10 years
Regent Park Redevelopment
5100 new units
approximately 3,300 market units (including affordable ownership opportunities)
Replace all 2,083 RGI units. 1 for 1.
- 1,583 rent geared to income on site
- 500 east downtown in other places.
For this model to work the place has to have rising values, big uplift in value in order to
Have to have somewhere to place people when they are displaced.
Whole project was done with huge community consultation. Also got an aquatic centre,
new park, child centre, retail facilities.
Key aspects of the project
Broad community consultation
all existing residents guaranteed new units
12 planning principles used
interesting and successful approach.
Transit Applications
Potential Canadian Applications
Sheppard Subway Private Sector Proposal 1990
- non-traditional revenues “density/value charges”
Current consideration
- Ontario: Metrolinx
- British Columbia: Translink...New real estate division
- Quebec
Vancouver: Translink (1998)
New government model to expand the system outside metro vancouver
Create a real estate division in 2008 to develop property and use the revenue to build.
Option 1: station area charge - $200/unit...6 million yr
Option 2: regional trans DC - $2,500 - 5000/unit, $16.7 - 33.3 mil/yr
Option 3: Station Capital Fund
Montreal (STM)
2004 created Trangesco: subsidiary to enable partnerships with private enterprise for
strategic development
2006 transgesco two subsidiaries
- 1 metrocom: mgt and development commercial areas
- Metrovision: digital displays in the metero
Toronto area
Metrolinx: Analyzing financial tools including land value capture tools
- Metrolinx can only buy land they need to use for the station. They can't capture
the value of land capture at all.
York-spadina line: Both York Region and the City of Toronto are examining TIF
applications - link to regs for provincial legisltation
Sheppard line: City looking at financing approaches including TIF's, consulting work
Hong Kong
One of few profit making transit operations
the key is th government public lead hold land system
50-70 yr leases above transit stations
largest urban
City who needed capital in the early 1990's was given a long
a narrow 310 hectare site by the central government
Like in tokyo, transit was a tool to encourage new development
The project faced numerous difficulties include the timing of the development and transit
London Docklands:
In the 1980s and 1990s the London docklands development corporation proposed land
value capture from development to fund the light rail system
LDCC had the power to acquire land
The hope was the transit line would spur private investment
due to economic downturn little economic investment occured
1998 LDCC annual report: the light rail system built, L 7.7 private investment, sale of
1,066 acres of land for redevelopment, reclamation of 1884 acres of derelict land.
London Crossrail Line
Began 2009
118 km east to west across london
Funding agrees October 2007
what has made its successful has been support from multiple parties. Fundng was
agreed to in October 2007.
Construction range of benefits identified
including specific economic benefits
a strong business case was developed to identify beneficiaries and determine the
funding approach.
Cost Sharing Between Beneficiaries
Government (⅓)
- economy
Private sector (⅓)
- land owners
- employers
- developers
Users (⅓)
- Public transport users
- road users
United States
Summary and conclusion
Land value capture can raise revenue for transit facilities
there are limitations however
hybrids or the way the tool is implemented must be studied and addressed carefully in
terms of its impacts
application may require new legislation or changes to existing legislation
1974 Costs of Sprawl
1973 - Fiscal Impact Analysis
This includes a TIF analysis
Cost benefit analysis, or cost effectiveness analysis (which is a variation on this)
Annexation VS Amalgamation
Amalgamation is merging municipalities together. Annexation is one municipality taking
over a section of another.
Municipality needs to expand into a place because it's boundary is filled up. If it wants to
take part of a township, they'll go to the province to see if they can annex the land. What
is the impact of this? What is the impact on innisville township? What is the impact on
the area to be annexed?
What is the impact on these residents?
What if innisfil lost a large part of its tax base, including a main industrial component.
What if they had to raise property taxes to compensate for that. Sometimes the province
has to give out grants for this.
We also can use annexation for urban boundary expansions
Impacts of specific land uses. Look at the impact on high rise developments for instance,
as was the case with Toronto and North York. What is the impact on commercial, office
space, retail. What is the impact on a shopping mall?
Costs VS Revenues
- Property taxes
- Grants or transfers
- User fees or other revenue
- You estimate these based on the reports to the province by
municipalities, the Financial Information Return (FIR).
- Per capita multiplier
- Case study - where are they appropriate, where are they not appropriate. See if
they are representative of the average cost of the rest.
- Service standard - the standard you want to use for the services in the area you
are studying, look at the service standard, this is what is used for development
- Comparable city
- Proportional valuation Method
- Tries to estimate the cost are based on evaluation being the assessed
value of the properties
- Employment anticipation
- Costs
City of Edmonton was a square, started to annex strathcounty, take parts of land that were
industry with a heavy tax base. Huge amount of controversy because of this.
Final Exam
2 components,
- short answers
- long essay questions
- choices for both
- cumulative to a degree, focus will be on second half
- will go through things with alex. Email will be sent out about all the things you
should read.
- Prof said PPP won't be covered, but might want to know about it just in case.
Management system
Three things we talked about qt the beginning.
1. Policy including fiscal policies
2. Programs including fiscal tools
3. Projects including any capital operation. Evaluations.
Operating budget