August 2017
Backgrounder

Development charges are a municipal revenue tool used to recover the costs of new municipal infrastructure that is needed to serve new neighbourhoods. But Ontario’s communities continue to struggle with financing the full cost of new development. Provincially-imposed limits to what can be included in development charges have reduced their effectiveness and transferred the costs of growth onto the existing property tax base.

In 1997, strict limits were placed on how much municipal governments could recover through these charges. These changes reduced developers’ contributions to many key services and exempted developers from contributing to a number of important services, such as transit, that enhance community well-being.

Currently, development charges only cover about 80% of the costs of growth-related capital. These shortfalls mean that municipalities must look to other revenue sources to manage the lack of funds and maintain service levels.

While the Smart Growth for Our Communities Act, 2015 expanded some items that would be eligible for full cost recovery, municipalities remain concerned that some services that are vital to growth remain excluded from development charge calculations. This includes recreation facilities, libraries, childcare facilities, waste management and energy-from-waste.    

AMO prepared a submission to the Province that reinforces the long-standing need for reform. This includes:
  • making landfills and energy-from-waste facilities eligible for cost recovery;
  • removing the ten percent reduction on all “soft” services;
  • applying forward looking service level calculations for all services; and,
  • reducing the list of services that are ineligible for cost recovery.
In addition, any changes in reporting practices should not increase the workload or administrative burdens on municipal governments.  

AMO will continue to press the case that development charges should be calculated in a way that will fully cover the costs of new development and growth.