Nenshi Talking Cuts to "Sprawl Subsidy"

Mayor Naheed Nenshi may have his work cut out for him in his bid to end Calgary's "sprawl subsidy" by increasing suburban developer levies.

Calling for an end to what he calls a developer "subsidy" that amounts to $4,800 for every new suburban home built in the city, Nenshi has laid out his arguments against the current agreement between the city and suburban developers. "I believe we should close this subsidy. I believe we should make growth pay for itself and not result in debt that goes on to our children and grandchildren," Nenshi said on a video posted on his website.

Negotiated in 2011, the current agreement between the city and developers calls for a 50/50 split for water and wastewater costs. According to Nenshi, those numbers, combined with the 85 per cent levy for "Community and Recreation" costs, works out to about 78 per cent of the cost of the required infrastructure for new communities (roads, water pipes, waste water pipes, emergency services, recreation facilities and libraries) paid for by the development industry. Developers are responsible for 100 per cent of the costs of transportation and storm sewers.

The remaining 12 per cent is covered by Calgarians through their utility bills, amounting to Nenshi's $4,800 per home number which he has said costs city taxpayers $33 million a year.

Calgary's development community takes issue with some of the language being used by the mayor. Guy Huntingford, CEO of Calgary's Urban Development Institute (UDI) – the member-based association for the development industry in and around Calgary - doesn't agree with Nenshi's terminology and the message that it sends to Calgarians.

"First of all, the term that's being used is subsidy, and we vehemently disagree with that – it is not a subsidy," said Huntingford, who as head of the UDI is de facto voice of the city's development community. "This current agreement that we have, which is what sets the levy, I don't believe there's one piece of verbiage in there that speaks of the word subsidy. It says this is what we require you to pay to develop in the city of Calgary, per hectare, and so that's what we're paying and we'll continue to do so until we negotiate a new agreement.

In 2011, Calgary City Council voted to double the amount Calgary developers pay per hectare in new developments, raising it from $137,380 per hectare to $315,365. With that deal not set to expire until 2015, Huntingford said he's troubled by the apparent willingness of Nenshi to re-open the agreement as an election issue.

"We're a little concerned that the agreement has basically been opened two-and-a-half years prior to the end of the agreement."

Nenshi has said that should enough councillors be re-elected, he would have the necessary votes in council to increase the developer levy to include 100 per cent of water, wastewater and community and recreation costs.

"When this council was elected in 2012, we increased the fees that developers must pay for homes in new neighbourhoods, but we didn't close the gap entirely," said Nenshi. "Today, Calgarians still pay about one in five dollars that are required for infrastructure for these new neighbourhoods."

Nenshi has stated that by failing to eliminate the "subsidy", council has artificially subsidized the cost of building in new neighbourhoods to the detriment of homes in older neighbourhoods, resulting in a disproportionate level of population growth in new areas.

"I think this belief that certain parts of Calgary are subsidizing other parts of Calgary is just pitting Calgarian against Calgarian and I don't think that's right," said Huntingford.

With Calgary's election set to take place Oct. 21, Huntingford said UDI is willing to talk on a new deal, provided the time is right.

"Obviously there's belief that what [Nenshi] is proposing will go through. I think the good thing is that we're still talking about negotiating rather than being mandated, and we're certainly prepared to sit down and negotiate when our current agreement is up."