The Province’s Transit Investment Advisory Panel will soon release a report with its recommendations on how to fund Let’s Move – the $50 billion transit investment program. The Panel’s focus is new revenue tools – including Metrolinx’s own short list: increased development charges, increased sales tax, a parking levy, and an increased fuel and gas [...]
The Province’s Transit Investment Advisory Panel will soon release a report with its recommendations on how to fund Let’s Move – the $50 billion transit investment program. The Panel’s focus is new revenue tools – including Metrolinx’s own short list: increased development charges, increased sales tax, a parking levy, and an increased fuel and gas tax.
In short, the Province needs to make sure that it doesn’t undermine its own investment in transit – by maintaining existing subsidies and tax incentives that disproportionately encourage driving.
If we want our $50 billion to actually deliver new transit riders on the scale it needs to, the broader framework of Provincial investment and tax breaks needs to be straightened out. We can’t expect to attract large numbers of commuters out of their cars if we
1) keep spending on roads at the current levels, perpetuating the current pattern of car-dependent growth, and
2) continue providing tax breaks to car ownership and driving.
Oh, and by the way, by fixing these wonky policies, we create a revenue source to fund transit: by redirecting a portion of planned overinvestment in roads to transit, or eliminating conflicting tax measures. One example of the latter is the current sales tax break on car insurance (estimated at $985 million of foregone revenue annually).
We could fund a good slice of the $2 billion a year the Province is looking for without new revenue tools or increased charges, by doing what we need to do anyway.
Here’s more detail from the submission:
To the Chair and Vice-Chair:
The central transportation challenge in our region is to attract large numbers of new riders to transit. This will mean enticing hundreds of thousands of commuters out of their cars and onto buses, trains and streetcars.
With this in mind, it is critical to avoid a situation in which the ability of the $50 billion Let’s Move transit investment to attract new riders is undermined by other conflicting provincial policies and actions – and a large scale shift to transit is not achieved.
Revenue tools to fund transit must be considered within the broader context of existing financial incentives, disincentives, and investment – in this case particularly in the context of provincial incentives, disincentives and investment.
Achieving the right balance of investment in roads relative to transit will be critical to the success of the planned transit investments. In trying to effect a shift to transit, getting this balance right is a strategic matter that deserves considerable attention.
Overspending on roads can undermine the ability of new transit investment to attract riders. If we continue to invest in roads and expand the road network at the current rate, perpetuating our car-dependent urban form, there will be little incentive for commuters to make the switch to transit.
Our current spending patterns seem to disproportionately favour roads. For example, in 2011, $546 million of funds raised through development charges in Ontario municipalities was spent on roads, compared to $85 million on transit – more than 6 times as much on roads as transit. If the City of Toronto, where much transit investment is taking place, is taken out of the equation, the numbers are $536 million spent on roads versus $71 million on transit, that is, almost 8 times as much on roads as on transit.
It is true that the development charge system imposes constraints on the ability of municipalities to raise money for transit through development charges (an issue in itself), but relative spending on roads and transit is nonetheless an important indicator. Development charge spending is up to municipalities, but it is important to monitor the aggregate impacts of such spending relative to provincial transit objectives.
The numbers mentioned above only reflect development charge spending and do not include spending on roads and transit funded by the province, by the federal government, or paid for through municipal property taxes and user fees. I am afraid I do not have these figures for the GTAH. However, I have done a rough calculation of projected spending in the GTAH based on municipalities’ development charge background studies, that places total projected growth-related spending at a ballpark figure of $15 billion over ten years for roads. (This figure too represents only a part of spending on roads.)
Making a shift to transit will require making a shift in investment, so that the province does not undermine its own $50 billion in transit spending. Making this investment shift – a reallocation of some spending from roads to transit to achieve the right balance– coincidentally creates a significant source of funding for transit. This could potentially deliver some hundreds of millions of dollars to fund transit in the coming years. It is a funding source that does not require new revenue tools or increased charges.
That is the spending side – what about the pricing side? Rational people consider the prices of things when they make their decisions, including decisions about how to travel in cities. Provincial policies affect transportation pricing, creating incentives and disincentives that affect these travel decisions.
It will be very important to create a rational and coherent set of price signals around transit in order to attract significant numbers of new riders. This is a key piece of the issue and deserves considerable attention.
Provincial tax policy plays a key role. Provincial tax policies must support the objective of attracting significant numbers of new transit riders. Again, the incentives to car travel relative to transit travel will be critical. If the province wants to attract a large number of new transit riders, it should ensure that it is not providing unwarranted and conflicting subsidies and financial incentives to auto travel.
As one example, in 2000, the province eliminated the retail sales tax on auto insurance premiums. This tax expenditure is currently estimated to cost the province $985 million per year. This is an illustration of a subsidy that provides a clear incentive to driving.
This, and other potential subsidies and incentives to auto travel need to be closely examined in the context of substantial provincial investment in transit. This is to ensure that the price signals created by tax policy support the objective of attracting new riders to transit, and the province’s transit policy objectives.
Moreover, to invest heavily in transit while subsidizing auto travel risks a potential waste of financial resources, with the effects of the investment and the conflicting tax breaks undermining each other.
Coincidentally, an elimination of this tax break would provide a significant source of funding to transit. This tax expenditure alone, with a current value of $985 million per year, is about half of what the province is looking for to fund transit. And this is just one example – there may well be other tax breaks that similarly conflict with a shift to transit.
To conclude, it’s my belief that a determination of the best tools for funding transit must include looking at the broader picture. That includes the wider context of the incentives and disincentives that provincial tax policy and investment create. It’s critical that these measures add up to a rational and coherent framework of investments, incentives and disincentives that support the province’s broader transit objectives, and its own investments in transit.
Fortuitously, undertaking this rationalisation, which is necessary in any event, can also provide significant revenue sources without new revenue tools.
 Ministry of Municipal Affairs, Financial Information Reporting, FIR2011, Provincial Summary, Schedule 61.
 This figure represents the projected need for new infrastructure to serve new development, and includes infrastructure that could be funded by development charges, municipal property tax and user fees, or federal and provincial grants. This is still not a comprehensive figure: it does not include spending on roads that is not related to growth and therefore not identified in development charge background studies. Other spending on roads, such as provincial investment in highways, is also not included.
 2012 Ontario Economic Outlook and Fiscal Review.
In a recent report to Council, Hamilton city staff recommended that a zone-based approach be considered as part of their upcoming development charges review. The staff report explains: As a result of previous feedback and direction from Council regarding the 2014 DC review, staff will be looking at methods to encourage intensification, including investigating the [...]
In a recent report to Council, Hamilton city staff recommended that a zone-based approach be considered as part of their upcoming development charges review. The staff report explains:
As a result of previous feedback and direction from Council regarding the 2014 DC
review, staff will be looking at methods to encourage intensification, including
investigating the feasibility of implementing area rated Development Charges, similar to
other municipalities such as the City of Ottawa, City of Markham, and Halton Region.
Here is a link to a video of a presentation I made to the Green Economy Summit in October about the linkages between misincentives, inefficient urban form and municipal finances.
A recent review of Perverse Cities by Ray Tomalty (Alternatives Journal 37.6) takes issue with several arguments presented. I’ll address these in a separate post. But the review claims that early results show that the Places to Grow (PtG) and greenbelt plans in the Greater Golden Horseshoe (i.e. Toronto mega-region) are helping rein in sprawl [...]
A recent review of Perverse Cities by Ray Tomalty (Alternatives Journal 37.6) takes issue with several arguments presented. I’ll address these in a separate post. But the review claims that early results show that the Places to Grow (PtG) and greenbelt plans in the Greater Golden Horseshoe (i.e. Toronto mega-region) are helping rein in sprawl here. This discussion does put the spotlight on the PtG and greenbelt plans five or so years after their adoption. Of course these early results are only now beginning to emerge, some time after Perverse Cities went to press. Nevertheless, whether these major planning initiatives have been succeeding in shifting the pattern of urban development in the GGH is something that I’ve been considering recently and is worthwhile exploring.
The first point to make is that the early results are very sparse. The Ministry of Infrastructure’s PtG website recently offered a progress report, with some preliminary evidence. It’s useful to look at the data provided and what it may or may not tell us about how we’re doing in meeting the growth plan objectives – which include achieving residential intensification targets of 40% of all new units to be accommodated on already urbanised land, directing growth to identified centres, and meeting minimum density targets – all with the aim of creating denser, more mixed use urban areas. Let’s look at the evidence so far.
Expansions of the urbanised area
PtG was to limit urban area expansions and the dedication of more greenfields land to urban development. Five years in, proposals are outstanding to add 8-10,000 hectares of land to designated greenfield to region’s urban envelope, within the so-called whitebelt (the area between the currently designated urban boundary and the greenbelt). This is about 17% of the total whitebelt area, equal to about one-third of the land area of the City of Mississauga.
No empirical evidence is provided yet on density trends. The Ministry claims that their own early analysis shows increasing densities in new suburban developments post-PtG in the Outer Ring municipalities. In the Inner Ring, they say that densities were already increasing before PtG. We’ll have a better understanding of this once we see the actual data.
A shift to apartments
The Ministry notes significant increases in higher density housing forms – in places like Burlington, Mississauga, Waterloo, Kitchener and Markham, as well as more townhouses and semis in places like Oshawa, Newmarket and Guelph.
It’s true that on a percentage basis, there’s been a shift to a larger share of apartments in the Inner Ring CMAs (Toronto, Hamilton and Oshawa). Singles fell from 47% of units in 2001-2005 to 38% in 2006-2010. However, we need to dig a little deeper and look at absolute numbers. When we do we see that the number of apartments built hasn’t really increased that much. Rather, the absolute number of singles, semis and towns has decreased, by about 55,000 units – that’s what’s mostly accounting for the increase in apartments’ share of the housing mix. And almost 3/4 of those apartments were built in the City of Toronto.
Housing Starts, Toronto, Oshawa and Hamilton CMAs
Source: CMHC Housing Market Indicators
Evidence of intensification provided by the Ministry suggests that of the 63,000 units added to the GGH between June of 2009 and June of 2010, 70% of units were built the in existing urbanised area. They note that half of these units were located in City of Toronto. Hopefully, some more fulsome data is forthcoming.
Tomalty suggests that intensification rates range from 16% to 50% (based on information derived from interviews with municipal planning staff). The 50% is for Peel Region, which of course includes Mississauga, where most of the intensification is taking place, as that municipality has essentially exhausted its supply of greenfields.
He also quotes research on intensification conducted by the Neptis Foundation, as per the table below, showing support for increasing rates of intensification.
Residential Intensification Rates
|City of Hamilton||24%||44%|
|Region of Halton||23%||58%|
|Region of Peel||30%||65%|
|Region of York||32%||64%|
|Region of Durham||31%||22%|
|Inner ring excluding Toronto||29%||59%|
But this data assumes two different urbanised areas for the two periods. The urbanised area is expanded for the 2001-2006 period, allowing for more development to be included as intensification than if the boundary were held constant over the two periods.
In fact, Neptis includes two calculations for the 2001-2006 period. The second one provides data keeping the urbanised area constant between the two time periods. This yields dramatically different results:
Residential Intensification Rates (Constant Urbanised Area)
|City of Hamilton||24%||14%|
|Region of Halton||23%||10%|
|Region of Peel||30%||14%|
|Region of York||32%||14%|
|Region of Durham||31%||9%|
|Inner ring excluding Toronto||29%||13%|
In my view the data in the second table are more accurate and reflective of actual intensification. The Neptis methodology tended to have a generous interpretation of the urban boundary, which led to a significant portion of units being counted as intensification when in fact they were within 500 metres of the urban boundary. That is, they were most likely slightly lagging greenfields development rather than intensification per se, a fact acknowledged by Neptis in their report. In other words, intensification in the 1991-2001 period is likely overestimated, and that shown for 2001-2006 in the second table likely more reflective of actual intensification rates.
I’d love to be proved skeptical – but I think we need much better data before we can draw meaningful conclusions about how we’re doing on Places to Grow.
 Ray Tomalty and Bartek Komorowski. Inside Out: Sustaining Ontario’s Greenbelt. Friends of the Greenbelt Foundation Occasional Papers, June 2011.
 Neptis Foundation, Implementing Residential Intensification Targets: Lessons From Research on Intensification Rates in Ontario, February, 2010, http://www.neptis.org.
Here’s a link to an interesting article about perverse parking subsidies in Baltimore:
I am still asked, from time to time, for The Economics of Urban Form. This report was prepared as background to the GTA (or “Golden”, after its Chair, Anne Golden) Task Force report Greater Toronto, back in 1996. It looks at three scenarios for growth in the Greater Toronto Area, and assesses the relative costs [...]
I am still asked, from time to time, for The Economics of Urban Form. This report was prepared as background to the GTA (or “Golden”, after its Chair, Anne Golden) Task Force report Greater Toronto, back in 1996. It looks at three scenarios for growth in the Greater Toronto Area, and assesses the relative costs of each. Moving from the status quo toward a more compact development pattern would save between 18% and 29% on infrastructure and other costs.
I believe the report is hard to find these days, so I’m making a pdf of it available for download by clicking here.
A recent report from the Canadian Urban Institute on office sprawl – The New Geography of Office Location and the Consequences of Business as Usual in the GTA – makes crystal clear a few key points: 1. Office sprawl continues in the Toronto area. While often neglected, non-residential sprawl is as or more important than residential [...]
A recent report from the Canadian Urban Institute on office sprawl – The New Geography of Office Location and the Consequences of Business as Usual in the GTA - makes crystal clear a few key points:
1. Office sprawl continues in the Toronto area. While often neglected, non-residential sprawl is as or more important than residential sprawl. The report notes that 66 million square feet of office space – more than that found in Calgary and Edmonton combined – accommodating 325,000 workers, has been built over the last 20 years in car-dependent suburban locations.
2. At present, within the Toronto region as a whole, 108 million sq.ft. of office space is located beyond the reach of high order transit. Even after current transit plans for the region are built, approximately 98 million sq.ft. of space will remain unserviced by high order transit.
3. At the same time, there is no shortage of development opportunities within already built-up areas, and especially within walking distance of existing subway stations.
4. Mispricing drives office sprawl. CUI’s analysis shows clearly how office development patterns shifted after property tax differentials emerged between Toronto and the surrounding municipalities in the late 1970s. Higher non-residential tax rates in Toronto deflected development just beyond the city’s boundary to suburban, car dependent locations. Another factor is the time and cost involved in gaining planning approvals for redevelopment in Toronto.
What are the implications of CUI’s analysis? Existing transit infrastructure is being underutilised, especially the potential for offices outside the core, that would generate work trips against the peak flow. New transit investments are not addressing the single biggest source of traffic congestion: car dependent office districts. We are not getting the most out of these expensive and region-shaping investments. Comprehensive district plans need to be developed to retrofit the car-dependent office areas, plans that delineate a strategy for moving them toward more mixed-use, balanced and amenity-rich places that can be accessed by means other than just the car. This includes removing existing planning and mispricing obstacles.
To access CUI’s report, click here.
Perverse subsidies are often hidden, unintentional, unnoticed. Yet they play a critical role in promoting sprawl. By definition perverse subsidies have negative effects on the economy, environment or society. We could also talk about perverse policy, which has the same negative effects. There are many, many, many instances of perverse subsidies and wonky policies. In [...]
Perverse subsidies are often hidden, unintentional, unnoticed. Yet they play a critical role in promoting sprawl. By definition perverse subsidies have negative effects on the economy, environment or society. We could also talk about perverse policy, which has the same negative effects.
There are many, many, many instances of perverse subsidies and wonky policies. In the book I give a lot of examples, and explain exactly how they promote sprawl. They can be found in taxes, development charges (“impact fees” in the US), rates for water, electricity and other utilities, homeownership programs, and many more. Municipal, provincial or state, and federal level policies and pricing can all have adverse effects on urban growth patterns.
These perverse subsidies and policies fly under the radar, and their role in creating sprawl is not recognized. Until that changes, and perverse policies are fixed, progress on curbing sprawl will be limited and come at high cost. Smart growth policies and plans, New Urbanism and other initiatives aimed at curbing sprawl and creating a better, more efficient, sustainable, livable urban environment will continue to be undermined and challenged by these perverse subsidies.
I hope we can have further discussion and debate about issues around pricing, policy and sprawl. Feel free to post a comment, or tell us about a perverse subsidy or policy in your city. For an introduction to the topic, you can download the first chapter of the book by clicking here.
Perverse Cities Shortlisted for the Donner Book Prize!See News & Events
Comments from Readers
“Analytical and detailed in its approach…consistently daring in challenging accepted views of the causes of and solutions for urban sprawl”. The Donner Jury
Pamela Blais' book Peverse Cities is the best explanation I have read for the persistence of urban sprawl. A must read for urbanists. http://twitter.com/terrypender
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