Description
The key is to charge the growth related infrastructure, operational and life cycle costs to the appropriate benefting areas.
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MANAGING THE
COSTS OF GROWTH
BEN BRUNNEN
OCT 7, 2013
KEY POINTS
• On the one hand, growth is a sign of prosperity and can help drive economic activity; on the other hand,
a growing population brings with it new infrastructure costs and demands on existing services.
• Policies that seek to encourage high-density development as a means of reducing municipal
infrastructure costs focus on a very narrow component of the costs of growth, and could actually lead to
higher total housing costs.
• It is only in the context of total construction, land, and operating-cost comparisons that policy-makers
and citizens can meaningfully understand the true costs of growth and make informed decisions.
• The key is to charge the growth related infrastructure, operational and life cycle costs to the appropriate
benefting areas. This enables Calgarians to make housing and occupancy choices that minimize their
costs and reduces or eliminates the tax-supported infrastructure costs that would accrue to the City.
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WHEN ACCOUNTING FOR TOTAL
CONSTRUCTION, INFRASTRUCTURE,
OPERATING, LAND AND LIFE CYCLE
COSTS BY BUILT FORM – AND
CONTROLLING FOR OCCUPANCY
LEVELS – SINGLE-FAMILY HOMES
ARE THE LEAST EXPENSIVE FORM
OF DEVELOPMENT.
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Managing growth and development within
a city can be challenging. On the one hand,
growth is a sign of prosperity and can help drive
economic activity; on the other hand, a growing
population brings with it new infrastructure
costs and demands on existing services.
Municipalities that accommodate growth
without sufcient compensation for the costs
create structural funding gaps that can only be
closed through other means of fnancing.
Municipalities generally apply both economic
and planning policies to managing growth-
related costs. Planning policy has tended
to focus on encouraging smart growth
development (high-density, mixed-use, transit-
oriented development) in both new and existing
communities. Economic policy can be used to
address the core market failures associated
with development and to encourage residents
to make informed decisions about where to live,
work and commute based on user pays.
This paper undertakes a review of the
planning and economic literature to compare
infrastructure costs in new versus developed
communities and by density of development,
and it identifes strategies for managing growth
and applies the fndings in a Calgary context.
UNDERSTANDING
AND MANAGING
GROWTH-RELATED
INFRASTRUCTURE
COSTS
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KEY
FINDINGS
1. INFRASTRUCTURE
COSTS BY TYPE OF
DEVELOPMENT
Overall, initial infrastructure costs in low-density new
developments tend to be higher per unit than they are
in smart growth developments, largely because the
costs are spread over more units and non-residential
uses. However, in smart growth communities, the
costs per square foot are higher, as higher density
development involves higher construction costs.
The higher per unit costs of lower density growth
are attributable to the need to build longer linear
forms of infrastructure (roads, storm sewers, water
and wastewater pipe), whereas the population-
based costs (police, fre, parks and recreation,
water and wastewater treatment) are comparable
for all residential built forms. Although costs are
slightly lower per unit in higher density scenarios,
interestingly, life cycle infrastructure costs are
comparable for both smart growth and low-density
development.
The literature and public discussions of infrastructure
costs tend to overlook the construction and land
costs of diferent built forms. All things being equal,
construction costs for higher density development are
more per square foot. It is only in the context of total
construction, land- and operating-cost comparisons
that policy-makers and citizens can meaningfully
understand the true costs of growth and make
informed decisions accordingly. According to the
City of Calgary, the Canada Mortgage and Housing
Corporation (CMHC) and private sector cost models,
when accounting for total construction, infrastructure,
land and 60-year life cycle costs by built form – and
controlling for occupancy levels – single-family
homes are the lowest cost form of development in
Calgary. This is largely the result of lower construction
costs per square foot and the economies of scale in
their occupancy (2.91 persons per unit in single-
family versus 1.81 persons per unit in multi-family).
These savings more than ofset higher single-family
infrastructure, operating and life cycle costs per unit
relative to other built forms.
The implication is that planning policies that seek to
encourage high-density development as a means of
reducing municipal infrastructure costs focus on a
very narrow component of the costs of growth, and
they could actually lead to higher total housing costs
(including unit and infrastructure costs) depending on
the housing and occupancy preferences of Calgarians.
It is in the context of total construction and operating-
cost comparisons that policy-makers and citizens can
meaningfully understand the true costs of growth and
make informed decisions accordingly.
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APPROACHES TO
MANAGING GROWTH-
RELATED COSTS
A. PLANNING POLICY
Planning policies generally focus on achieving smart
growth objectives in new and existing communities.
SMART GROWTH AND EXISTING
COMMUNITIES
Policies that promote smart growth in existing
communities generally have less than stellar success.
Key obstacles include complex approval and zoning
regulations, the need for community support,
difculties securing fnancing and challenges in
terms of assembling land parcels. Perhaps the biggest
problem is resident opposition, as densifcation has
the potential to increase congestion, reduce green
space and increase stress on existing infrastructure.
Smart growth policies can also lead to higher housing
costs and create overall afordability difculties for the
community. Regulatory and zoning reforms are critical
for helping to alleviate these challenges and achieve
smart growth objectives.
SMART GROWTH AND NEW
COMMUNITIES
Policies that promote smart growth in new
communities will help alleviate the need for future
intensifcation. While smart growth policies are likely
to improve density of development and mobility choice
within communities, in the absence of efcient pricing
for transportation infrastructure, the increased use of
public transit and work-home collocation objectives
of smart growth are not likely to be successful. Smart
growth policies also have the potential to alienate key
segments of the population and could drive growth
to the fringes of the municipality, creating adverse
spillover efects.
B. ECONOMIC POLICY
As an alternative (or complement) to planning
regulation, economic policy seeks to address the
key market failures of growth: failure to ensure that
new development pays for the infrastructure costs
of growth, failure to account for the social costs of
congestion and failure to account for the benefts of
open space.
PAYING FOR THE COSTS OF
DEVELOPMENT
New development imposes costs on a municipality in
terms of initial capital costs, operating, maintenance
and life cycle infrastructure costs. Good economic
policy ensures that the initial capital costs are
borne by developers through marginal cost pricing
while households or communities that beneft pay
the ongoing operating and life cycle costs through
diferential tax rates, user fees and/or levies.
PAYING FOR THE COSTS OF ROADS
Ideally, roads should be user pay. In the absence of
tolling authorities, a second-best approach would be to
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assign the ongoing operation and life cycle costs to the
communities that beneft through diferential taxes in
proportions similar to development levy formulas.
PAYING FOR THE COSTS OF
TRANSIT
The most-direct benefciaries of transit are the users
of the service. Fares are generally average-cost based,
but they should be based on distance travelled and
time of use in order to discourage urban sprawl and
to encourage transit use for short trips. Zone and
peak-time pricing could efectively accomplish these
objectives. To the extent that external benefts arise
through a reduction in pollution and congestion costs,
some subsidization is justifed, particularly if funded
via a roads-based charge such as a gasoline tax.
PAYING FOR THE COSTS OF OPEN
SPACE
When cities grow outward, developers often purchase
land used for agricultural purposes. This may result
in the loss of community access to open space.
Municipalities can address this by establishing green-
space requirements in new developments as well
as earmarking sensitive areas for environmental
protection and use.
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AS AN ALTERNATIVE (OR
COMPLEMENT) TO PLANNING
REGULATION, ECONOMIC POLICY
SEEKS TO ADDRESS THE KEY
MARKET FAILURES OF GROWTH:
FAILURE TO ENSURE THAT NEW
DEVELOPMENT PAYS FOR THE
INFRASTRUCTURE COSTS OF
GROWTH, FAILURE TO ACCOUNT
FOR THE SOCIAL COSTS OF
CONGESTION AND FAILURE TO
ACCOUNT FOR THE BENEFITS OF
OPEN SPACE.
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2. APPLYING THE
RESEARCH IN A
CALGARY CONTEXT
A. PLANNING POLICY
In 2009, the City of Calgary adopted a new Municipal
Development Plan (MDP) to guide growth and
development in the City. This plan seeks to encourage a
more intensifed form of urban development and has as
its target the accommodation of a 33 per cent population
growth in developed areas over the next 30 years. As a
short-term goal, the City expects to accommodate an
additional 28,000 people in existing communities by
2019. However, from 2002 to 2012, Calgary experienced
a net loss of approximately 3,000 residents from existing
communities to the suburbs.
The City is also developing a strategic framework for
growth and change to help prioritize and sequence growth
to specifc targeted areas city wide. While the framework
is thorough, applying this approach in combination with
ambitious development targets in existing communities
(and the absence of major zoning or regulatory reforms to
facilitate redevelopment) will likely have a cascading efect
in terms of constraining development in the city.
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Revisit the City’s short to medium-term intensifcation
targets for existing communities in the MDP, with a
rebalance of population growth in new and existing
communities informed by the total construction, land
and infrastructure costs associated with various built
forms and occupancy counts per unit. This will enable
a more gradual approach to development within the
City, minimize potential spillover efects, enhance total
economic housing benefts for Calgarians and avoid
unnecessarily eroding housing afordability through
excessive regulatory and time constraints;
2. Streamline regulatory and zoning processes for
developments in existing communities, with a focus on
permitting higher density development in existing low-
density neighbourhoods;
3. Invest signifcant staf time and resources in
implementing the strategic framework for growth
and change, as both the literature and experience in
Calgary have demonstrated a need for partnership with
industry and a joint commitment to ensuring that such
projects are a success;
4. Introduce an afordability and diversity of housing
form sensitivity metric into the strategic framework
for growth and change informed by total construction,
land and infrastructure costs per person to ensure that
the framework is not inadvertently selecting more-
expensive, homogeneous developments or distorting
the market.
This modifed planning policy approach would help
garner greater public support for development initiatives
in existing communities, provide the City with greater
fexibility to adjust its policies as needed, provide
time for community groups and associations to align
their community plans with the MDP and enable the
development community to innovate and adjust their
business models accordingly.
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PLANNING POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Introduce an afordability
and diversity of housing
form sensitivity metric into
the strategic framework
for growth and change,
informed by total
construction, land and
infrastructure costs per unit
Not included in the
framework
Need to ensure the
framework is responsive to
market demand and ofers a
diversity of housing choices
and price points based on
the actual costs of growth
and development in order to
maximize economic welfare
Sensitivity metrics help policy-
makers monitor the impact
of their decisions and make
adjustments over time.
Invest signifcant staf
time and resources in the
initial implementation of
the strategic framework for
growth and change
Not currently
contemplated
Both the literature and
experience in Calgary have
demonstrated a need for
partnership with industry
and joint commitment in
ensuring such projects are a
success
Investing substantial focus and
resources to implement the
strategic framework for growth
and change enables continuous
learning and adjustments to
ensure projects are a success
without adversely afecting
stakeholders. The lessons
learned can be applied to future
projects.
Revisit the City’s short- to
medium-term development
targets for existing
communities in the MDP,
with a more gradual
approach toward the
intensifcation of existing
communities, informed by
the total construction, land
and infrastructure costs
Target is to
accommodate a 33
per cent population
growth in developed
areas over the next 30
years
Targeting development
in existing communities
is a difcult approach to
managing growth. Complex
regulation, the need for
community support,
difculties securing fnancing
and challenges in terms of
assembling land parcels are
all at play.
A more gradual approach to
development within the city
helps ensure that citizens,
businesses and the public
sector have time to adjust
their business practices and
lifestyle choices. This approach
will also minimize spillover
efects, enhance total economic
housing benefts for Calgarians
and avoid unnecessarily
eroding housing afordability
through regulatory and time
constraints.
Streamline regulatory
and zoning processes for
developments in existing
communities, with a focus
on permitting higher
density development in low-
density neighbourhoods
City undertaking
Transforming
Planning initiative to
strengthen internal
approval processes.
Zoning reforms in
existing communities
are not currently
anticipated.
Complex regulation and
zoning policies are key
barriers to achieving
development targets in
existing communities.
Streamlining regulatory
and zoning processes helps
remove barriers to achieving
development targets in existing
communities.
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B. ECONOMIC POLICY
The City has stated that the current approach to
fnancing growth does not result in enough revenue
to recover costs. To address this difculty, the 2011
development levy agreement introduced a water and
sanitary sewer levy for the frst time since 1999, along
with new levies for bus and pedestrian infrastructure.
While Calgary development charges are now relatively
comprehensive, aside from storm sewers, all levies are
set on a city-wide basis using an average-cost approach,
which essentially subsidizes costlier developments
at the expense of more-afordable ones. A marginal
cost price approach would send better market signals
to prospective homebuyers in terms of the costs of
growth-related infrastructure and the services they use.
In addition, the City continues to fund infrastructure
maintenance and life cycle costs of growth out of the
general tax base as opposed to collecting them from
the benefting areas through tools such as special taxes,
local improvement levies or diferential residential tax
rates.
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD ALSO FOLLOW THESE
RECOMMENDATIONS:
5. Adopt a marginal cost approach to development
levies (as opposed to an average-cost approach) to
ensure that new development in each community
pays the actual infrastructure costs incurred. This
should apply to new and existing communities. This
approach can be achieved through, for example, the
use of catchment boundaries for water, sanitary,
storm and transportation infrastructure. The City
should target this change in time for the next
development levy negotiation with the industry in
2015;
6. Calculate maintenance, operating and life cycle
infrastructure costs associated with new growth
(roads, recreation, police, fre, EMS) and assign
these costs to the residential units or communities
that beneft (through various tools such as a
special tax, a local improvement levy or diferential
residential-tax rates) using a marginal cost
approach. This approach should also apply to utility
fees. Accounting for the true cost of development
enables Calgarians to make housing and occupancy
choices that minimize their own costs and reduce or
eliminate the tax-supported infrastructure costs that
would accrue to the City;
7. Reduce the use of planning policies to regulate
density in favour of the total construction, land and
infrastructure cost approach for managing growth.
This will lead to a more-efcient, market-based
approach to growth management and will better
enable Calgarians to make informed housing choice
and occupancy decisions based on total costs, and it
will reduce overall costs for the City;
8. Adopt diferent prices for transit use based on
distance travelled, zones and peak use as opposed to
the current fat-fee structure. This will help ensure
that consumers pay based on the marginal cost of
providing the service, and it will reduce incentives
for overuse; and
9. Phase in any tax burden shifts over a fve- to 10-year
period to ensure Calgarians have time to adjust their
work, home and commuting decisions accordingly.
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ECONOMIC POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Adopt a marginal cost
approach to development
levies in existing and new
communities
City negotiates
development levies
based on average cost
Marginal cost pricing is
efcient. Better directs
growth based on cost
Ensures new development in
each community pays the actual
infrastructure costs incurred
(as opposed to more-expensive
developments being subsidized
by lower cost developments)
Calculate and assign
infrastructure operating
and life cycle costs
to communities and
households
Funded out of the
general tax base
Primary principle is that
benefciaries of a service pay
the cost. Avoids structural
infrastructure defcits
Helps citizens make more-
informed decisions about
housing costs and choice based
on the true cost of growth.
Reduces or eliminates tax-
supported infrastructure costs
associated with growth
Phase in any tax burden
shifts over fve to 10 years
N/A Ensures stability for
citizens and the City in
terms of understanding tax
obligations and revenue
expectations
Ensures Calgarians have time
to adjust their work, home and
commuting decisions in the
event their costs increase
Adopt diferent prices
for transit use based on
distance travelled, zones
and peak use
Applies a current fat-
fee structure
Primary principle is that
benefciaries of a service
pay the cost. Avoids over-
consumption and use
Diferential pricing helps
ensure consumers pay based on
the marginal cost of providing
the service and reduces
incentives for overuse.
Reduce the use of planning
policies to regulate
density in favour of the
total construction, land
and infrastructure cost
approach
Uses planning policy
to regulate density
in order to reduce
growth costs
Municipal planning policies
that mandate higher
densities unnecessarily
increase housing costs and
reduce the total economic
welfare of Calgarians
Accounting for the true cost
of development enables
Calgarians to make housing
and occupancy choices that
minimize their own costs and
reduce or eliminate the tax-
supported infrastructure costs
that would accrue to the City.
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1. INTRODUCTION
Managing growth and development within a city can
be challenging. On the one hand, growth is a sign of
prosperity and can help drive economic activity. On the
other hand, a growing population brings with it new
infrastructure costs and demands on existing services.
Municipalities that accommodate growth without
sufcient compensation for the incremental costs
run the risk of creating structural funding gaps that
can only be closed through other means of fnancing.
Often, municipalities will subsidize this growth at the
expense of existing taxpayers.
Municipalities generally apply both economic and
planning policies to managing growth-related costs.
Planning policy tends to focus on encouraging smart
growth development (high-density, mixed-use,
transit-oriented development) in new and existing
communities to minimize growth-related costs.
Although this approach can be helpful in setting
the overall direction for the desired spatial design
of a municipality, it is limited in terms of its efect
on growth management due to its inability to direct
market dynamics and consumer demand.
A complementary and, perhaps, more efective
approach to encouraging efcient growth and
development is economic policy. This approach helps
address the core market failures associated with
expansive development and encourages residents to
make informed decisions about where to live, work and
commute based on cost of use.
This paper undertakes a review of the planning
and economic literature to compare infrastructure
costs and to identify approaches and best practices
for managing growth, and it applies the fndings to
Calgary, with recommendations for change based on
the Overton Window approach.
1
Section 1 undertakes
a review of the comparisons of infrastructure costs in
new and developed communities; section 2 compares
the regulatory and economic approaches for managing
growth in new and existing communities; and
section 3 applies the fndings to Calgary and makes
recommendations for change.
2. INFRASTRUCTURE COSTS
IN NEW AND DEVELOPED
COMMUNITIES
The infrastructure costs associated with growth
generally consist of local roads within new
developments; expansion of arterial roads servicing the
community; new transit infrastructure (bus stops, train
stations, buses); water and wastewater distribution
and facilities; storm sewers; new police, fre and
EMS stations; neighbourhood parks and pathways;
recreation facilities; libraries; planning and regulation;
and social service and administrative supports (City of
Calgary 2005:45 Financing Growth).
In addition to building the infrastructure, which
represents a one-time cost, there are also the ongoing
operating and life cycle costs to consider. Operating
costs refer to the expenditures required to keep
the infrastructure running, and life cycle costs are
the maintenance, renewal and rehabilitation costs
associated with the useful life of the asset (Vander
Ploeg and Brunnen 2003:25). These all need to be
considered and accounted for in understanding the
costs of managing growth.
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2.1 COMPARING COSTS BY DENSITY IN
NEW COMMUNITIES
New development in greenfeld areas can be built to
accommodate high- or low-density units. Each has a diferent
infrastructure cost profle. The CMHC (1995) undertook
a comparison of the infrastructure costs of a conventional
suburban development versus a smart growth (high-density,
mixed-use, transit-oriented) development. The smart
growth plan had 71 per cent more dwelling units (units per
hectare at 43 versus 22 for the suburban development), 20
per cent more recreation and open space and more than
twice the amount of commercial land. The study found
that initial capital costs per unit were 16 per cent lower
($5,300 per unit) in the smart growth plan. These savings
were largely attributed to the higher residential density that
spread the costs over more units and the higher proportion
of non-residential land in the area, which reduced the
apportionment of total costs to the residential sector. The
study also found that the smart growth plan generated life
cycle cost savings of $11,000 per unit over 75 years, or $147
per unit annually.
While these fndings indicate that the more-compact form
of development results in lower per unit infrastructure
costs, the challenge with this study is that it does not
necessarily take into consideration infrastructure costs per
square foot of development or the number of occupants in
the community. These metrics would help provide more-
objective measures of the relative costs of each form of
development. Interestingly, the life cycle costs of smart
growth development are comparable to those of suburban
development, with savings of $147 per unit annually in
the smart growth model. Using a more recent life cycle
infrastructure-costing tool, CMHC (2008:7) found that
for most of the cost categories, the neo-traditional
[smart growth] households are estimated to have a
lower annual cost than the conventional development.
Hard infrastructure and linear infrastructure costs
[roads, water and wastewater facilities] show the
highest degree of reduction, at 25 per cent less cost.
On the other hand, the municipal costs—such as
fre, police and waste management—that are more
directly proportional to population, not density of
development, are similar in both scenarios.
In a similar vein, the City of Calgary estimated the
incremental infrastructure costs of accommodating an
additional 1.3 million people over 60 years through a
dispersed (as opposed to densifed) growth pattern at 11.2
billion city wide, or $145 per new resident per year (City
of Calgary 2008:ii). Total operating costs were much more
comparable, with a total net diference of $130-million over
60 years, or $1.67 per person per year.
The most signifcant capital costs were attributed to roads,
which would require more length and use in the dispersed
scenario as well as higher maintenance and reinvestment
costs (City of Calgary 2009:ii). For water and wastewater
systems, more pipe would be needed to service more
development; however, treatment facility costs (new water
and sewer plants) would be similar in both scenarios, as these
costs are population, not density, based. Similarly, fre service
costs would be lower due to less need for new stations, but
engine and personnel costs would be similar, while police,
parks and recreation costs would be comparable.
Generally, the higher per unit costs of lower density growth
are attributable to the need to build longer linear forms
of infrastructure (roads, storm sewers and water and
15
wastewater pipe), whereas the population-based
costs (police, fre, parks and recreation, water and
wastewater treatment) are comparable. Once the
initial infrastructure costs are incurred, the operating,
maintenance and life cycle costs per unit are higher for
lower density development, but they are comparable.
2.2 COMPARING COSTS IN NEW
AND EXISTING COMMUNITIES
When comparing development costs in new versus
existing communities, the infrastructure cost profle
is very diferent. In new communities, all of the initial
capital costs needed to service a community (roads,
water and wastewater pipe and facilities, sidewalks,
etc.) would be required. For existing communities, not
all of these new infrastructure assets are necessarily
needed. Because some of the infrastructure to
accommodate growth in existing communities may
already be in place, the new infrastructure construction
costs would likely be lower at the outset.
However, there may be some additional investments
needed in existing communities. Water and wastewater
facilities and distribution lines could require additional
upgrades to accommodate higher population densities
(City of Calgary 2011a:9). There is also an incremental
demand on transportation infrastructure, police and
fre services, parks and recreation and social services
associated with densifcation, but these population-
based costs are likely comparable to those that would
be incurred in new development.
Construction costs in existing communities, however,
tend to be higher than in greenfeld areas, as crews
need to operate within the built environment, which
is more complex, regulatory burdensome and has
a narrower margin for error than does a greenfeld
setting. Some studies suggest that redevelopment
construction costs can be as much as 25 per cent
higher than in greenfeld areas for comparable units
(Urbis 2011).
Overall, it is difcult to determine precisely the extent
to which infrastructure costs difer in new versus
existing communities. According to the City of Calgary
(2013a:6):
Capital costs of road and transit construction
depend on the size of a community and
the distance to various destinations such
as employment centres, shopping centres
and the downtown core. Capital costs of
waterworks and sanitary sewers depend on
population, the total distance of transmission
and distribution system, the cost of treatment
facilities and the topography of the
development area.
Thus, infrastructure cost comparisons in new versus
existing communities will largely be community
specifc. Ewing (1997, as cited in Litman 2013:8) ofers
these general relationships:
• Costs are low in rural areas where households
provide their own services.
• Costs increase in suburban areas where services
are provided to dispersed development.
• Costs decline with clustering and as densities
increase from low to moderate.
• Costs are lowest for infll redevelopment in areas
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with adequate infrastructure capacity.
• Costs tend to increase at very high densities due to
congestion and high land costs.
2.3 GROWTH, CONSTRUCTION AND
LAND COSTS
An area often overlooked in the literature and public
discussions of infrastructure costs is the construction
costs of diferent built forms. All things being equal,
higher density development costs more. High-density
developments have diferent building requirements
and material inputs such as elevators, sprinklers,
basements and fre stairs/safety requirements that
result in higher costs.
Altus (2013) publishes an annual handbook detailing
construction costs in various municipalities across
Canada. This handbook is widely used by builders
and developers to estimate project costs for a given
building type and year. When considering the costs per
spare foot of three comparable built forms – medium-
quality single detached house, timber frame medium-
quality townhouse and medium-quality condo/
apartment in Calgary – average single-family home
costs are the least expensive ($145/sq. ft.), followed by
townhomes ($148/sq. ft.). Condo/apartments are the
most expensive ($245/sq. ft.).
This creates an interesting dynamic. When capital
infrastructure, life cycle, maintenance and operating
costs are lower per unit for smart growth residential
development and construction costs per square
foot are higher, there is the potential that smart
growth development actually raises the cost of home
ownership, depending on the housing choice and
occupancy preferences of Calgarians.
Approaching growth management issues based on the
total construction costs per unit makes good sense;
after all, the total construction costs of a residential
unit not only include the cost of building the residence,
but also the cost of building the capital infrastructure
as well as the operating, maintenance and replacement
costs of both. Focusing on the public infrastructure
component alone is only part of the equation. It is in
the context of total construction and operating cost
comparisons that policy-makers and citizens can
meaningfully understand the true costs of growth and
make informed decisions accordingly.
Table 1 estimates the construction and infrastructure
costs of the three comparable built forms discussed
previously. Average square footage per unit estimates
are based on the 2013 Canadian Homebuilder Survey
(2013: 11). Occupant rates (persons per unit) are
based on average suburban single-family and multi-
family numbers for Calgary in 2011 (City of Calgary
2013a:63). The infrastructure costs are calculated
based on two scenarios: The CMHC infrastructure cost
model compares infrastructure costs in smart growth
communities versus traditional suburban development
(1995) adjusted for infation, and the City of Calgary
Plan It Calgary model estimates costs associated
with a dispersed and a compact form of development
(2009)
2
. Greenfeld land prices are derived from
recent sale prices in Calgary, using an average sale
price of $210,000 per acre (Avison and Young 2011:6).
Land per unit is assigned at 4,000 sq. ft. for single-
17
family homes, 1,000 sq. ft. for townhomes (including
communal area proportions) and 550 sq. ft. for condo/
apartments (based on four-story development and
including communal area proportions).
Not surprisingly, average construction costs per unit
are the highest for the single-family household at
$290,000 (2,000 sq. ft.). Condo/apartment unit costs
are second highest at approximately $270,000 (1,100
sq. ft.) and townhome units are the most afordable
at $206,500 (1,400 sq. ft.). When accounting for
capital infrastructure, operating, land and 60-year
life cycle costs, the disparity increases. Under the
CMHC scenario, a single-family home is approximately
$68,000 more than a condo/apartment and nearly
$120,000 more than a townhouse. Under the Plan It
Calgary scenario, the single family home is $82,000
more than a condo/apartment and $142,000 more
than a townhome.
That said, dwelling units alone do not account for
population growth. Single-family homes in Calgary
have higher occupants per unit relative to townhomes
and condo/apartments. According to the City of
Calgary (2013a:63):
In 2011 there was an average of 2.88 people per
single-family dwelling unit, while each multi-
family dwelling unit averaged 1.81 people. Also,
as the newer suburbs have a higher proportion
of young families, occupancy is higher there than
in the developed areas. Overall, the new suburbs
have an occupancy rate of 2.91 people per unit.
Based on current occupancy trends, accommodating
more people in higher density developments would
require more units:
[We] expect occupancy to remain around this
low level for at least the near term as more
multi-family units with lower occupancy rates
are built …. An increase in the community’s
density often requires a larger proportion of
multi-residential dwellings, which typically
accommodate fewer people. As such, the
relationship between population and units is not
proportionate (City of Calgary 2013a:63).
Given these dynamics, it is instructive to equalize
construction costs by occupant rates, as this will give a
more accurate picture of the costs of accommodating
population growth. Under the CMHC model, when
controlling for occupant counts, a 2,000-square-foot
home is approximately $75,000 cheaper (including
construction, infrastructure, land and 60-year
operating and life cycle costs) than a 1,100 square
foot condo/apartment and $41,000 cheaper than
a 1,400-square-foot townhouse. Under the Plan It
Calgary model, a 2,000-square-foot single-family
home is $35,000 cheaper than a 1,100-square-
foot condo/apartment and $2,000 cheaper than a
1,400-square-foot townhouse.
These fndings suggest that when accounting for total
construction, infrastructure, operating, land and
life cycle costs by built form – and controlling for
occupancy levels – single-family homes are the least
expensive form of development. This is largely the
result of lower construction costs per square foot and
18
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19
economies of scale in their occupancy (whereby more
people are accommodated per unit). These savings
more than ofset their higher total infrastructure, land,
operating and life cycle costs relative to other built
forms.
2.4 SUMMARY OF
INFRASTRUCTURE COST FINDINGS
Overall, initial infrastructure costs in low-density new
developments tend to be higher per unit than they are
for higher density developments, largely because the
costs are spread over more units and non-residential
uses. However, the costs per square foot are also
higher, as higher density development involves
higher construction costs. Interestingly, life cycle
infrastructure costs are comparable for both types of
development, although they are slightly lower per unit
in higher density scenarios.
When accounting for total construction costs
(including capital infrastructure, operating,
maintenance and life cycle costs), land costs and
number of occupants, single-family homes are the
least expensive form of development, as they ofer
economies of scale in their ability to accommodate
more occupants than other built forms do. For local
governments to make informed public policy choices
about the costs of growth, these costs need to be
considered together as the total cost of built forms.
In setting growth management policy and assigning
costs, local governments are encouraged to attribute
the capital infrastructure, operating and life cycle
costs to the benefting residential unit and account for
occupancy levels by unit type. This approach would
enable Calgarians to make housing and occupancy
choices that minimize their own costs and reduce
or eliminate the tax-supported infrastructure costs
associated with growth that would accrue to the City.
20
3. APPROACHES FOR
MANAGING GROWTH-
RELATED COSTS
Understanding infrastructure costs is the frst step to
understanding how best to manage growth-related costs.
In order to manage these costs, local governments have
two general mechanisms available: planning policy and
economic policy. This section compares these separate
approaches to managing growth-related costs in existing
and new communities and their respective strengths and
weaknesses.
3.1 PLANNING POLICY
Planning policy, in the form of zoning requirements,
is generally the preferred tool for municipalities for
managing growth. Through smart growth policies,
zoning is utilized to manage long-term infrastructure
costs by encouraging high-density, mixed-commercial
and residential-use communities that are oriented
around transit nodes. This is achieved through tools
such as density minimums and smart growth design
requirements in new developments, limitations on the
amount of new greenfeld developments available and
pro-intensifcation policies in existing communities.
3.1.1 SMART GROWTH IN EXISTING
COMMUNITIES
The intensifcation of existing communities has been a
key objective identifed by policy-makers and planners
to manage growth; however, intensifcation policies
have been met with less than stellar success. In a review
of the empirical literature on densifcation and infll
development, McConnell and Wiley (2010:26) conclude:
[T]here is not strong evidence that policies
implemented to promote infll, such as Urban
Growth Boundaries and Priority Funding
Areas, have worked. The combination of local
government control over land use, economic
costs, household preferences for housing
types, and neighborhood opposition, presents
formidable obstacles to any such policy.
A review of the experience in Portland, Oregon, which
has imposed an urban growth boundary, suggests that
density did not necessarily increase in the community
relative to other cities, and “growth in the Portland
area may have been pushed into other adjacent low-
density areas that were not subject to the restrictions”
(McConnell and Wiley 2010:5).
The CMHC (2005a) published a report card on smart
growth in Canada and concluded, “[T]here is a large gap
between the stated growth management policies found
in the planning documents of the six study regions and
accomplishments on the ground. While major progress
has been made in terms of language and policy goals,
performance is lagging behind considerably.”
Key obstacles to implementing intensifcation include
urban area permitting and approval processes that
require multiple hearings and strong community
infuence in the process; complex or stringent
building and zoning requirements that increase the
costs of development; a lack of community support;
21
diferent fnancial and risk profles of intensifcation
development; and challenges in terms of assembling
land parcels for development (McConnell and Wiley
2010:5, Farris 2001).
Perhaps the biggest challenge to intensifcation is
resident opposition. Densifcation has the potential to
increase congestion, reduce green space, increase stress
on existing infrastructure and create more social issues
in existing communities (Litman 2013:8, McConnell
and Wiley 2010:5). In essence, the costs are localized
while the benefts are regionalized, and some studies
have even found that intensifcation can reduce the
house prices of adjacent properties, depending on the
nature of the development.
Indeed, in a study of mixed land uses on housing values,
Song and Knaap (2004) fnd “housing prices increase
with their proximity to—or with increasing amount
of—public parks or neighborhood commercial land
uses …. [H]ousing prices are higher in neighborhoods
dominated by single-family residential land use ….” The
authors also fnd, “[H]ousing prices tended to fall with
proximity to multi-family residential units.”
Given that a home is the single-largest investment many
families will make, it is natural for homeowners to
want to protect their investment. In a discussion of the
evolution of zoning, Fischel (2001:8) asserts, “Among
its most prominent advantages was protection of
home values, especially in the suburbs, because zoning
forestalled the threat of apartments and commercial
and industrial uses from settling in the neighborhood.”
From a developer perspective, zoning was “founded on
the need to induce homeowners to invest their savings
in a large, undiversifed asset” that could not be insured
for equity losses (Fischel 2001:11).
These factors suggest that there is a long-standing,
deep-rooted interest in protecting the value of the
investments made by homeowners, and the existing
zoning framework was conceived to achieve this
objective. Consequently, eforts to promote smart
growth in existing communities are efectively seeking
to undermine what property owners have sought to
achieve through decades of zoning practice. This puts
pro-intensifcation policies at a signifcant disadvantage.
Urban intensifcation is also complicated. Unlike
greenfeld development projects, prospective infll
properties tend to vary, with diferent attributes,
development potential, obligations and requirements.
Properties may have environmental remediation
requirements that need to be addressed. Existing
community plans may not align with the development
potential of prospective properties. Design standards
may be more stringent to account for local form
and character concerns. Municipal planners may be
challenged to apply a consistent decision-making
framework for the approval of infll developments –
particularly those that are innovative or controversial.
CMHC (2005b, 2006) found environmental
remediation costs, fnancial and general economic
conditions, planning and regulatory approvals and
neighbourhood opposition were key barriers to
successful brownfeld intensifcation in Canada.
From a process perspective, urban intensifcation
projects tend to be more complex than new
developments are. They involve the co-ordination
of multiple municipal departments (planning,
engineering, transit, roads, parks and recreation),
22
land uses (commercial, recreational, single- and multi-
family residential), stakeholders (developers, residents,
community groups, social agencies, businesses,
municipal administrators) and plans and processes
(community planning, zoning applications, building
permits, community engagement).
These complexities generally lead to uncertainty in
the development process, extending timelines and
increasing costs. A number of studies have compared
the relationship between land regulation, construction
costs and housing afordability. Mayer and Sommerville
(2000) fnd that “metro areas with more extensive
regulation have up to 45 percent fewer [housing]
starts” and that while “development or impact fees have
relatively little impact on new construction … regulations
that lengthen the development process or otherwise
constrain new development have larger and more
signifcant efects.”
Saks (2005) found that “places with more regulation
experience a 17 percent smaller expansion of the housing
stock and almost double the increase in housing prices”
when hit by a demand shock. Glaeser and Gyourko
(2003:35) fnd that “measures of zoning strictness are
highly correlated with high prices” – fndings that were
later validated by Sommerville in a report commissioned
by CMHC (2005c:2).
These fndings suggest that the role of urban
intensifcation in achieving smart objectives tends to
be limited and, in fact, has the potential to result in
higher housing costs and to create overall afordability
challenges for the municipality. Perhaps the ideal
approach for incorporating urban intensifcation into
municipal smart growth planning policy is best phrased
by Farris (2001:2):
The primary goal of smart growth advocates
should be to encourage higher-density quality
development at the metropolitan edge and
exurbia while selectively choosing those
relatively limited infll opportunities.
3.1.2 SMART GROWTH IN NEW
COMMUNITIES
Municipalities are often encouraged to focus on
strengthening smart growth principles in new
communities. After all, policies that promote smart
growth in new communities will alleviate the need for
subsequent intensifcation of existing communities in
the long run. However, applying smart growth practices
to new communities represents a substantial shift in
consumer preferences and business practices that may
not be realistic.
In terms of where to live, increased mobility has made
quality of life one of the top priorities for people when
choosing their location, and it is often a higher priority
than commuting times or proximity to work. As Fischel
(2001:21) asserts, “[T]he local school’s test scores are
a larger determinant of home values than access to
jobs.” In a recent comparison of smart growth and
conventional communities in Canada, CMHC (2013)
found that while there was increased walking and
bike use within smart growth communities compared
with traditional suburban development, there was no
substantial diference in the use of public transit for
longer trips. The smart growth communities had 17 per
cent fewer jobs within a 5 km radius. These fndings
suggest that the smart growth objectives of work-home
23
collocation and greater transit use may be difcult to
achieve.
From an employment perspective, while job
suburbanization has been observed to some extent with
population disbursement, much of it is the result of the
increased accessibility of businesses to less-expensive
land due to increased transportation accessibility
(Fischel 2001:19). These types of jobs tend to be location
specifc (located in industrial and logistics parks) and
generally not in areas accommodative for residential
uses. However, there is evidence that some jobs (such
as restaurant, retail and professional services) do follow
population growth (Brueckner 2000:163, Cervero
2001:5), especially when coupled with investments in
transportation nodes that help encourage sub-centre
development (Cervero 2001:11). These jobs could
potentially enable work-home collocation objectives.
However, as Fischel (2001:20) notes, “In the multi-
nucleated metropolis, urban jobs are almost equally
far from any given suburb,” and unless transportation
accessibility becomes constrained, residents are unlikely
to prioritize work-home collocation in the communities
they choose.
In terms of transit use, more transportation accessibility
has increased the disbursement of people and
businesses across cities. In the absence of transportation
accessibility constraints, creating an economically viable
public transit system that meets the needs of residents
(with increasingly complex trips) in a manner more
efcient than the automobile is a signifcant challenge.
Another consumer-related challenge of smart growth
relates to the preferences of the population. CMHC
(2013) found that traditional developments attracted
an older cohort with more adults with children, which
is consistent with the City of Calgary’s occupancy rates
(2.91 persons per unit in new single-family homes
compared to 1.81 in multi-family units) (City of Calgary
2013a:63). In regions where there are location choices
and a lack of alignment of development policies across
neighbouring municipalities, smart growth policies
for new communities may drive these prospective
homeowners to the urban fringes or to neighbouring
municipalities in pursuit of the quality of life they desire.
This efect is exacerbated when considering afordability:
While the construction and development costs per unit
are lower for smart growth properties, the costs per
person and per square foot are higher. Thus, under smart
growth, not only will prospective homeowners be getting
a smaller home, they will be paying more for it per
square foot. These conditions have the potential to create
an unsustainable development pattern within the region
over the long run, with free-rider costs imposed on the
central municipality.
Finally, there is the need for developers and
administrators to adjust to new business practices
because of smart growth policies in new communities.
Smart growth represents a new business model for many
traditional suburban developers and requires signifcant
co-ordination, risk sharing and alignment on the part of
the municipality (Cervero 2001:12, Calgary Chamber of
Commerce 2008:49). If new developments have higher
densities, smaller roads, less parking and are dependent
upon public transit for mobility, then the supporting
infrastructure and services need to be in place near the
time that residents move in. This creates complications,
uncertainty and additional risk (over and above the
uncertainty over the demand for the new product) and
needs efective management to ensure the viability of
smart growth strategies.
24
PERHAPS THE BIGGEST CHALLENGE
TO INTENSIFICATION IS RESIDENT
OPPOSITION. DENSIFICATION HAS
THE POTENTIAL TO INCREASE
CONGESTION, REDUCE GREEN
SPACE, INCREASE STRESS ON
EXISTING INFRASTRUCTURE AND
CREATE MORE SOCIAL ISSUES IN
EXISTING COMMUNITIES.
25
3.2 ECONOMIC POLICY
Economic policy is the second tool available to
municipalities for managing growth-related costs and is
often used in concert with regulation. From an economic
perspective, excessive or unsustainable growth is largely
the result of three market failures: failure to ensure new
development pays for the infrastructure costs of growth,
failure to account for the social costs of congestion
and failure to account for the benefts of open space
(Brueckner 2000). Well-designed economic policies and
approaches can address these challenges.
3.2.1 PAYING FOR THE COSTS OF
DEVELOPMENT
Failure to account for the true infrastructure costs
of growth is perhaps the most signifcant and direct
challenge for efectively managing growth and
development. As discussed, these costs are best
accounted for as part of the construction, operation and
life cycle costs of the residential unit. The most common
tool available to municipalities to help account for
these costs is development cost levies or of-site levies.
Developers pay these levies to compensate municipalities
for the initial infrastructure costs of new development –
in both greenfeld and infll situations.
The concept of the development levy approach is founded
upon the benefts-received principle, which seeks to
ensure that those who beneft from the incremental
infrastructure and services also pay the costs. This is
widely applied by municipalities across Canada when
it comes to development charges for new communities
(CMHC 2010:6).
One of the problems with the development levy
approach in Canada, however, is that fees tend to be
standardized per unit of development and class of
property (residential, commercial, industrial) regardless
of the location of the development within the community
(Kitchen 2006:28). While this is an administratively
efcient approach, it is essentially average-cost pricing
for development, which subsidizes relatively more-
expensive developments at the expense of less-expensive
ones.
A more efcient approach would be to charge
development fees based on the actual marginal costs of
the new infrastructure that is required in the community
as opposed to average costs (Kitchen 2006:28, Slack
2006:16, Brueckner 2000:166). To account for diferent
unit sizes and densities within communities, levies
should be apportioned within developments based on
marginal infrastructure costs per unit.
While the development cost levies are useful from a
benefts perspective, they are able to capture only a
narrow component of the overall costs of growth and
development. As discussed, the ongoing operating,
maintenance and life cycle costs of infrastructure must
also be considered.
The failure to appropriately account for and price life
cycle infrastructure costs has led to the infrastructure
defcits confronting municipalities (Vander Ploeg and
Brunnen 2003:28). These types of costs need to be
invested on an ongoing basis to maintain and/or extend
the useful life of municipal infrastructure assets. When
maintenance is deferred, the useful life of the asset is
shortened and rehabilitation and replacement costs
arrive sooner.
26
The general operating and capital budgets of
municipalities usually fund life cycle infrastructure
costs; however, this approach is detrimental from
a benefts perspective, as existing residents end up
subsidizing new growth, and there are no price signals
for understanding how much infrastructure to provide.
In addition, an inability to fully acknowledge and
account for these costs in the price of the residential
unit sends distorted signals to both the market and
the decision-makers. A more efcient social-welfare
maximizing approach would be to charge these costs
to the benefting area and/or units as opposed to
regulating built form densities and absorbing these costs
through the general tax base.
The best way to price operating and life cycle costs is not
through development levies (because the benefciaries
are long-term residents, not initial homebuyers) but
rather through tax tools such as a special tax by-law,
diferential residential tax rates at a community level
or a local improvement levy (which are all available to
Alberta municipalities).
3.2.2 PAYING FOR THE COSTS OF
TRANSPORTATION
The second market failure of urban growth is the
failure to account for the true costs of transportation.
Transportation accessibility is widely cited as a
key contributing factor in the suburbanization and
expansion of cities (Fischel 2001, Brueckner 2000,
Litman 2013). As Cervero (2001:4) posits:
Transportation investments induce growth for one,
and only one, reason: they improve accessibility.
It is accessibility – the opportunity to reach places
efciently – that attracts new growth.
A market failure arises when the costs of the
investments and the use of transportation infrastructure
(construction, congestion, environmental impacts) are
not paid for by the benefciaries.
3.2.2.1 ROADS
Growth requires investment in both local community
roads and arterial road networks. For local community
road infrastructure, all of the benefts tend to accrue to
the local homeowner, and a development cost charge for
the initial investment is an equitable approach (City of
Calgary 2005:39).
For arterial roads, the benefts can be divided into the
option to use the road and the actual use of the road.
The option to use component is linked to the property,
and the initial costs (both the extensions and updates to
the existing system) can be fnanced equitably through
of-site development levies (City of Calgary 2005:40).
For the actual use and operating costs of the road,
the ideal pricing tool is a user-based road toll (City of
Calgary 2005:39, Kitchen 2006:76, Slack 2006:11). This
is the most efcient way to ensure that benefciaries
(motorists) pay for the costs of the infrastructure they
use. The key here is to ensure that the price is based on
the actual costs of maintaining the roads, including life
cycle costs, along with a pollution component for vehicle
use (City of Calgary 2005:39). To account for congestion
costs, diferential pricing could be applied during peak
periods. Many jurisdictions in Canada, the United
States and overseas have experienced success with these
electronic tolling technologies (Kitchen and Lindsey
2013:48).
27
In the absence of a road toll and similar to the approach
discussed above, a second-best approach is to estimate
the operating, maintenance and life cycle infrastructure
costs of the road network and then apportion
appropriate costs to the benefting communities. This
can be done through diferential property taxes such
as local improvement levies, diferential residential tax
rates or a special tax option similar to the way initial
capital costs are paid through developer levies.
3.2.2.2 TRANSIT
Transit infrastructure is like that of roads. There is
an option for use beneft that is tied to the property
(especially for rail-based transit) as well as a user
component. The option for use component is a localized
one, with strong benefts linked to the properties in the
immediate vicinity of the investment (Cervero 2001:5,
Doherty 2005, Smith, Gihring and Litman 2009, Junge
and Levinson 2012). This suggests that under a benefts-
based approach, the initial infrastructure costs should
be funded through levies on local benefting properties.
A number of studies have advocated for land-value
capture approaches for fnancing transit, which would
provide an incentive for more densifed development in
proximity to transit infrastructure (Smith, Gihring and
Litman 2009, Junge and Levinson 2012).
From a use perspective, the most-direct benefciaries
of transit are the users and, correspondingly, user fees
should represent a signifcant component of the costs
(City of Calgary 2005:39, Kitchen and Lindsey 2012).
Fares should also be based on distance travelled and
time of use, as fat fares encourage urban sprawl and
discourage transit use for short trips (Kitchen and
Lindsey 2012:6). Zone and peak-time pricing could
efectively accomplish these objectives.
Some suggest there are also external benefts to public
transit such as a reduction in pollution and congestion
costs, leading to lower infrastructure costs for road
investments (City of Calgary 2005:40). Where road toll
prices are in place, these externalities are accounted for.
However, in the absence of tolls, some subsidization is
justifed, particularly if funded via a roads-based charge
such as a gasoline tax (City of Calgary 2005:41). To the
extent that transit provides a social beneft through
universal access for lower income individuals, an
income-based approach is the most efective method for
achieving this objective.
3.2.3 PAYING FOR THE COSTS OF
OPEN SPACE
The fnal market failure is the failure to account for
the social value of open space. This failure arises
when the community loses access to open space that
has been valued for leisure by existing residents.
Generally, when cities grow spatially, developers often
purchase agricultural land. While some argue that
urban development devours scare agricultural land, it is
important to bear in mind that this transaction involves
a willing buyer and seller, whereby the value of the land
is worth more in urban use. Where the productive value
of the agricultural land is high, urban development is
less spatially consuming (Brueckner 2000:164).
Accounting for the public value of open space, however,
is a subjective exercise involving substantial discretion.
Options available to municipalities include establishing
green space requirements in new development as well as
earmarking sensitive areas for environmental protection
and recreation use such as in the case of Stanley Park in
Vancouver or Fish Creek Park in Calgary.
28
3.3 SUMMARY
Managing growth-related costs is a complex task.
While land-use policies can play an important role in
directing development, the limitations of this tool must
be recognized. Policies that encourage smart growth
design and densifcation are not likely to be met with
substantial success on their own. These approaches,
while well intended, generally involve high-level
estimations and speculation in terms of overall targets
and market demand and do not address the underlying
economic dynamics of individual and business location
and mobility decisions and the corresponding market
failures at play.
While it is important for existing communities
to prioritize intensifcation, the primary focus of
planning policy cannot be to manage growth-related
costs, as there are too many inertial factors at play.
Highly regulated environments compromise housing
afordability. For new communities, planning policies
that seek to achieve smart growth objectives have the
potential to be more efective, but they need to be
developed in concert with efective fnancial tools.
The key is to focus on full-cost pricing for new
infrastructure and ongoing operational and life
cycle costs and assign these costs to the appropriate
benefting areas (in new and existing communities). This
approach would lead to the lowest overall construction,
infrastructure and life cycle costs for accommodating
population growth. It ensures that the benefciary pays
the costs and that the tax base does not absorb them.
Because single-family housing ofers the lowest
total cost per occupant, planning policies that seek
to encourage high-density development as a means
of reducing municipal infrastructure cost focus on
a very narrow component of the costs of growth,
and this actually leads to higher total housing costs
through the oversupply of high-cost, high-density,
low-occupancy units. These cost increases are in excess
of the infrastructure and life cycle cost savings that
would accrue to government in the absence of such
policies (costs already funded through the tax base).
Consequently, this type of policy approach ultimately
decreases the total economic welfare of the citizens of
Calgary.
Transportation pricing is perhaps the most important
factor in managing growth-related costs. As Cervero
(2001:3) notes, “[R]ising motorization is rooted in
many factors beyond sprawl,” and much of the demand
is linked to rising incomes and access to motorized
vehicles (Brueckner 2000:169, Cervero 2001:3). Some
studies found that smart growth actually leads to
increased trafc congestion (Litman 2013:8, Cox 2000,
Ewing and Cervero 2010). Consequently, addressing
the challenges that arise with increased transportation
mobility requires more than smart growth or anti-
sprawl-related policies. It requires pricing. Perhaps
Kitchen and Lindsey (2013:8) put it best: “Without
efcient pricing of public transit and roads, users will
not make appropriate decisions about how often to use
it, where to live and work, and so on.”
29
4. HOW DOES CALGARY
COMPARE AND WHAT
ARE THE PRIORITIES FOR
CHANGE?
The City of Calgary is a very active municipality in
terms of its approach to managing the costs of growth.
Fiscal sustainability is an increasing concern in the
municipality, which has experienced substantial growth
in recent years. In response, the City developed a new
approach to growth management that prioritizes smart
growth patterns of development in new and existing
communities. The City also recently increased its growth-
related development levies.
This section reviews the City of Calgary’s planning and
economic policies for managing growth-related costs in
the context of the above reviewed literature and ofers
recommendations for strengthening the City’s approach.
The Overton Window approach is the basis for these
recommendations.
4.1 CALGARY PLANNING POLICIES
FOR MANAGING GROWTH-RELATED
COSTS
In 2009, the City of Calgary adopted a new MDP to guide
growth and development (City of Calgary 2009). This
plan sought to encourage a more smart growth-oriented
form of urban development, with a focus on high-density,
mixed-use, transit-oriented development in new and
existing communities. This plan is based on a long-term
vision wherein the city will accommodate a 33 per cent
population growth over the next 30 years in developed
areas as well as 50 a per cent growth in developed areas
over the next 60 to 70 years (City of Calgary 2013b:51).
The intent is to increase densities in existing and
new communities and to intensify around strategic
nodes and corridors to ensure efcient use of land
and infrastructure. As part of this plan, the City has
developed a strategic framework for growth and change
that seeks to prioritize and sequence infrastructure
investments in new and existing communities based on a
combination of factors in order to achieve smart growth
objectives (City of Calgary 2009
art 5).
The City should be commended for its well-intentioned
and comprehensive approach to managing growth and
development. This ambitious project is sure to provide
helpful direction in guiding municipal growth and
development over the long term. The challenge with
the City’s approach, however, is the complexity of the
task before it. A number of intricate factors, many of
which will be situation specifc and guided by economic
and behavioural fundamentals, drive growth and
development decisions.
4.1.1 GROWTH IN EXISTING
COMMUNITIES
Perhaps the biggest issue confronting the City’s
overall growth management approach is the focus on
intensifcation as a major source of future development
– 50 per cent of population growth over the next 60 to
70 years. For context, “Calgary has grown by 243,706
people since 2002, while the new suburbs have added
246,687 people” (City of Calgary 2013a:58). This is a
net loss of approximately 3,000 residents from existing
communities to the suburbs over this 10-year period.
As a short-term goal, the City expects to accommodate
an additional 28,000 people in existing communities by
2019 (City of Calgary 2013:a:54). This is a net increase of
approximately 31,000 or 2,400 residents annually.
30
Recall that the use of planning policies to achieve
intensifcation of existing communities is a limited
tool that must overcome substantial inertial efects
and has the potential to result in higher housing costs,
create overall afordability challenges for the City and/
or drive growth to the fringes of the region. In the
absence of a focused approach, including streamlined
planning processes, permitted use zoning and
ongoing commitment and resources on the part of the
municipality (usually in partnership with the private
sector), these targets will be very difcult to achieve.
Moreover, alignment of existing community plans with
the overarching MDP is generally needed for enlisting
community support for achieving densifcation targets in
existing communities. However, many of the community
plans have not been updated since the adoption of
the MDP and, as a result, there is uncertainty and
the potential for unnecessary delays in the evaluation
of development applications that seek to achieve
intensifcation targets.
A more prudent and gradual planning approach
to managing growth city wide would be for a more
balanced approach to population growth in new and
existing communities, in concert with reforming the
planning and regulatory process to remove barriers to
development and identify select existing communities for
prioritization under the growth management framework.
This prioritization needs to be informed by the true costs
associated with various built forms, based on actual
occupancy counts per unit.
4.1.2 PRIORITIZING AND
SEQUENCING COMMUNITY
DEVELOPMENT
Calgary City Council is in the process of fnalizing criteria
and performance metrics for the prioritization and
sequencing infrastructure investment and development
patterns as part of its strategic framework for growth and
change. These criteria include the capacity of existing
infrastructure, the community services in place, city-
funded costs, access to transit, land supply, readiness
to proceed (landowner and community support),
contiguous growth, innovation and employment
opportunities (City of Calgary 2012).
While the framework is thorough, some of these criteria
(such as innovation) present signifcant discretion
in their interpretation, which creates uncertainty for
prospective developers in terms of bringing forward
applications for development. Other criteria, such as
access to transit and employment opportunities, have
the potential to substantially narrow the market for
new development to areas where land is already more
expensive and would cater to a particular subset of the
population.
The access to employment criterion seems particularly
limiting, as collocation of residence and place of
employment is very difcult to achieve in a dispersed
metropolitan area with diferent sectors. Employment
decisions are not necessarily up to the discretion of
the employee and accounting for quality in job type
is a subjective process. Areas with the greatest job to
population densities in the city include the downtown,
the east and the northeast (City of Calgary 2013a:84).
31
The downtown is already well developed and well
serviced by transit and other transportation modes,
while the east and the northeast have strong industrial
components and employment centres that are dispersed
and isolated from residential areas. Employment
proximity is also not necessarily a desired attribute
sought by homebuyers, given the accessibility of
transportation options within the city, combined with
a preference of quality of life in residential location
decisions. Lower job to resident ratios in other quadrants
of the city, such as the north central and west areas,
demonstrate this.
Rather, the City is encouraged to focus on access to
existing transportation infrastructure, nodes and
corridors, which are already incorporated in the criteria
under “community services in place.” This approach will
ensure that residents are able to transport themselves
to employment locations efciently, and these are
areas where future employment opportunities will
tend to develop in response to population growth
(Cervero 2001:5). However, to make this approach truly
successful, Cervero (2001:12) asserts:
A number of pre conditions must usually exist if
new transport facilities are to exert meaningful
land use impacts. Foremost among these
are: permissive and incentive zoning, … the
availability of nearby vacant or easy to assemble
and developable parcels; support for land-use
changes among local residents; a hospitable
physical setting; complementary public
improvements; … and an absence of physical
constraints.
While the strategic framework for growth and change
seeks to address many of these factors, it is unlikely
that all of these factors will be in place at once for the
majority of development opportunities in the city. This
approach also requires substantial focus, involvement
and resourcing by the municipality, which needs to
be consistently committed in order for the strategic
framework to be successful. In reviewing the City’s
experience in building smart growth communities, the
two most prominent and ground-breaking examples,
McKenzie Towne and Garrison Woods, required strong
partnership and co-ordination between the City and the
developers:
Both the developer and the City incurred
signifcant risk in the process, the developer
provided a product that was unconventional
for the market, and the City undertook
eforts to create alternative engineering and
design standards to ensure the success of the
development. Design standards for Garrison
Woods took 14 months, and a similar approach
for the McKenzie Towne project took 12 months
(Calgary Chamber of Commerce 2008:49).
In addition to these complexities, perhaps the biggest
challenge with the City’s approach is the creation of
a new strategic framework for growth and change in
addition to setting ambitious intensifcation targets for
existing communities relative to historical standards.
Absent major zoning and regulatory reforms to facilitate
redevelopment, this will likely have a cascading efect in
terms of constraining development in the city.
Consequently, the City should proceed with caution
in implementing the framework to ensure it is able to
commit the necessary focus, resources and investments
32
to complement the private investment and make sure
that the projects are successful. Lessons learned and
continuous improvement could then be applied to future
projects. Running scenario analyses on the afordability
and diversity of housing form in prioritized developments
would also be prudent to ensure that the municipality
is not inadvertently selecting more-expensive and
homogeneous developments through the framework.
4.1.3 PLANNING POLICY
RECOMMENDATIONS
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Revisit the City’s short- to medium-term
intensifcation targets for existing communities in
the MDP, with a rebalance of population growth in
new and existing communities, informed by the total
construction, land and infrastructure costs associated
with various built forms and occupancy counts per
unit. This will enable a more gradual approach to
development within the city, minimize potential
spillover efects, enhance total economic housing
benefts for Calgarians and avoid unnecessarily
eroding housing afordability through excessive
regulatory and time constraints;
2. Streamline regulatory and zoning processes for
developments in existing communities, with a focus
on permitting higher density development in low-
density neighbourhoods;
3. Invest signifcant staf time and resources in
implementing the strategic framework for growth
and change, as the literature and experience in
Calgary have demonstrated a need for partnership
with industry and joint commitment in ensuring such
projects are a success;
4. Introduce an afordability and diversity of
housing form sensitivity metric into the strategic
framework for growth and change, informed by total
construction, land and infrastructure costs per person
to ensure the framework is not inadvertently selecting
more-expensive, homogeneous developments or
distorting the market.
This modifed planning policy approach would help
garner greater public support for development initiatives
in existing communities, provide the City with greater
fexibility to adjust its policies as needed, provide
time for community groups and associations to align
their community plans with the MDP and enable the
development community to innovate and adjust their
business models accordingly.
33
PLANNING POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Introduce an afordability
and diversity of housing
form sensitivity metric into
the strategic framework
for growth and change,
informed by total
construction, land and
infrastructure costs per unit
Not included in the
framework
Need to ensure the
framework is responsive to
market demand and ofers a
diversity of housing choices
and price points based on
the actual costs of growth
and development in order to
maximize economic welfare
Sensitivity metrics help policy-
makers monitor the impact
of their decisions and make
adjustments over time.
Invest signifcant staf
time and resources in the
initial implementation of
the strategic framework for
growth and change
Not currently
contemplated
Both the literature and
experience in Calgary have
demonstrated a need for
partnership with industry
and joint commitment in
ensuring such projects are a
success
Investing substantial focus and
resources to implement the
strategic framework for growth
and change enables continuous
learning and adjustments to
ensure projects are a success
without adversely afecting
stakeholders. The lessons
learned can be applied to future
projects.
Revisit the City’s short- to
medium-term development
targets for existing
communities in the MDP,
with a more gradual
approach toward the
intensifcation of existing
communities, informed by
the total construction, land
and infrastructure costs
Target is to
accommodate a 33
per cent population
growth in developed
areas over the next 30
years
Targeting development
in existing communities
is a difcult approach to
managing growth. Complex
regulation, the need for
community support,
difculties securing fnancing
and challenges in terms of
assembling land parcels are
all at play.
A more gradual approach to
development within the city
helps ensure that citizens,
businesses and the public
sector have time to adjust
their business practices and
lifestyle choices. This approach
will also minimize spillover
efects, enhance total economic
housing benefts for Calgarians
and avoid unnecessarily
eroding housing afordability
through regulatory and time
constraints.
Streamline regulatory
and zoning processes for
developments in existing
communities, with a focus
on permitting higher
density development in low-
density neighbourhoods
City undertaking
Transforming
Planning initiative to
strengthen internal
approval processes.
Zoning reforms in
existing communities
are not currently
anticipated.
Complex regulation and
zoning policies are key
barriers to achieving
development targets in
existing communities.
Streamlining regulatory
and zoning processes helps
remove barriers to achieving
development targets in existing
communities.
M
O
R
E
A
M
B
I
T
I
O
U
S
R
E
F
O
R
M
L
E
S
S
A
M
B
I
T
I
O
U
S
R
E
F
O
R
M
34
4.2 CALGARY ECONOMIC POLICIES
FOR MANAGING GROWTH-RELATED
COSTS
In recent years, the City found that the current approach
to fnancing growth did not result in sufcient revenue to
recover costs. According to the City of Calgary (2010:4):
Suburban growth at traditional densities
in the range of four units per acre has been
acknowledged as not completely paying for itself.
The overall benefts realized by The City for this
type of low density suburban development do
not outweigh the initial and ongoing operational
costs to The City.
Consequently, the City was challenged to reconcile this
funding gap through changes to planning and growth-
fnancing policies. The 2011 to 2015 development
levy agreement negotiated between the City and the
Urban Development Institute introduced a water and
sanitary sewer levy for the frst time since 1999, along
with new levies for bus and pedestrian infrastructure
(City of Calgary 2011b). Levies, fees and charges for
new development in Calgary now include local roads,
arterial roads, storm sewers, trafc signs, fre, EMS and
police stations, recreation and library facilities, large
buses, administration/inspection costs and water and
wastewater facilities.
Increasingly, the City has been seeking to enhance
the responsiveness of development agreements to the
actual costs of servicing new communities and has, for
example, created diferential rates for storm sewers
depending on the watershed area of the community.
However, all other levies are set on a city-wide basis (City
of Calgary 2013b:11). As discussed, this average-cost
pricing approach is inefcient and distorts the market
for new development by subsidizing more-expensive
developments at the expense of more-afordable ones.
A marginal cost-price approach (for new and existing
community development) would send better market
signals to prospective homebuyers in terms of how the
cost of growth relates to the infrastructure and services
that they consume.
While the City’s development levy approach is benefcial
in terms of ensuring that new development pays for the
infrastructure costs of development, “the City’s funding
problem in recent years was partly … driven by the
spread out growth pattern in Calgary and the way the
municipality uses funding and fnancing tools available
to it” (City of Calgary 2013b:1). In particular, the City
continues to be challenged in terms of its approach to
assigning the maintenance and life cycle infrastructure
costs of growth to the benefciaries. According to the City
of Calgary (2013b:5):
While the largest components of the cost
attributable to growth are the initial capital
costs, new capital necessitates ongoing operating
costs and eventual replacement costs. … On an
annual basis, lifecycle maintenance consistently
costs more than operating costs in roads and
utilities. By comparison, annual operating costs
are higher than lifecycle maintenance costs in
transit. Transit operating costs tend to increase
with the number of hours of operation each year,
which is determined by growth in the population
as well as the geographic expansion of the
city. As a result, when making growth related
infrastructure investment decisions, The City of
Calgary has to consider ongoing cost obligations
required for new infrastructure.
35
As discussed, the operating maintenance and life cycle
infrastructure costs associated with new development
are best paid for by the benefciaries. Specifcally, these
costs (along with initial infrastructure costs) need to
be accounted for in the costs of construction of various
housing unit built forms and assigned to the benefting
household or community.
For road-related infrastructure, in the absence of a road
tolling authority, a second-best approach is to assign
these costs to the benefting area through a special tax
levy, a local improvement levy or a diferential residential
tax rate for the area in proportions similar to the original
capital levies. For water and wastewater utility services,
incorporating depreciation and/or infrastructure
replacement costs into the user fees will help ensure the
long-term fnancial viability of the system in proportion
to the costs of consumption.
For transit infrastructure, current fee structures are not
responsive to costs of service or demand for use; rather,
they are based on average pricing even the costs increase
with distance (City of Calgary 2013:14). A more efcient
approach would be to introduce diferential pricing
based on trip length, zones and peak periods. In terms
of infrastructure, a very distinct property benefciary
pattern is associated with rail infrastructure, and the
infrastructure replacements costs of all transit should
be assigned to the benefting area in a manner similar to
other growth-related infrastructure.
Adopting these approaches will enable Calgarians to
make informed choices about the costs of the various
built forms they choose, balanced against the benefts,
and lead to the most-efcient and cost-efective outcome
for total infrastructure costs – ultimately maximizing
the total welfare of Calgary citizens and reducing or
eliminating City-funded growth costs. This pricing
approach reduces the need for planning regulation in
managing growth-related costs, as it is ultimately more
efective at managing growth and maximizing social
welfare.
One consideration is the political acceptability of
shifting costs traditionally funded through city-wide tax
obligations to benefting communities. By supporting the
MDP with ambitious densifcation targets, Calgarians
have already expressed an interest in moving toward
an efcient built form. Transitioning toward a more
user-pay fnancing system (provided overall taxes do
not increase, all things being equal) will help them
achieve this goal. A phase-in approach to shifting the
tax burden will help homeowners to gradually absorb
the incremental increase and adjust their home, work
and commuting decisions accordingly. Council adopted
a similar approach in its decision to consolidate the
business tax and the non-residential property tax in 2011.
36
THIS PRICING APPROACH REDUCES
THE NEED FOR PLANNING
REGULATION IN MANAGING
GROWTH-RELATED COSTS, AS IT
IS ULTIMATELY MORE EFFECTIVE
AT MANAGING GROWTH AND
MAXIMIZING SOCIAL WELFARE.
37
4.2.1 ECONOMIC POLICY
RECOMMENDATIONS
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Adopt a marginal cost approach to development levies
(as opposed to an average-cost approach) to ensure
new development in each community pays the actual
infrastructure costs incurred. This should apply
to new and existing communities. This approach
can be achieved through, for example, the use of
catchment boundaries for water, sanitary, storm
and transportation infrastructure (City of Calgary
2013:15). The City should seek to target this change in
time for the 2015 development levy negotiation with
the industry;
2. Calculate maintenance, operating and life cycle
infrastructure costs associated with new growth
(roads, recreation, police, fre, EMS) and assign these
costs to benefting residential units or communities
(through various tools such as a special tax, a local
improvement levy or diferential residential tax rates)
using a marginal cost approach. This approach should
also apply to utility fees. Accounting for the true cost
of development enables Calgarians to make housing
and occupancy choices that minimize their costs and
reduce or eliminate the tax-supported infrastructure
costs that would accrue to the City;
3. Reduce the use of planning policies to regulate
density in favour of the total construction, land and
infrastructure cost approach to managing growth.
This will lead to a more efcient, market-based
approach to growth management and will better
enable Calgarians to make informed housing choice
and occupancy decisions based on total costs, and it
will reduce overall costs to the City;
4. Adopt diferent prices for transit use based on
distance travelled, zones and peak use as opposed to
the current fat-fee structure. This approach will help
ensure that consumers pay based on the marginal cost
of providing the service, and it will reduce incentives
for overuse; and
5. Phase in any tax burden shifts over fve to 10 years
to ensure Calgarians have time to adjust their work,
home and commuting decisions accordingly.
38
M
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R
E
A
M
B
I
T
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O
U
S
R
E
F
O
R
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L
E
S
S
A
M
B
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T
I
O
U
S
R
E
F
O
R
M
ECONOMIC POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Adopt a marginal cost
approach to development
levies in existing and new
communities
City negotiates
development levies
based on average cost
Marginal cost pricing is
efcient. Better directs
growth based on cost
Ensures new development in
each community pays the actual
infrastructure costs incurred
(as opposed to more-expensive
developments being subsidized
by lower cost developments)
Calculate and assign
infrastructure operating
and life cycle costs
to communities and
households
Funded out of the
general tax base
Primary principle is that
benefciaries of a service pay
the cost. Avoids structural
infrastructure defcits
Helps citizens make more-
informed decisions about
housing costs and choice based
on the true cost of growth.
Reduces or eliminates tax-
supported infrastructure costs
associated with growth
Phase in any tax burden
shifts over fve to 10 years
N/A Ensures stability for
citizens and the City in
terms of understanding tax
obligations and revenue
expectations
Ensures Calgarians have time
to adjust their work, home and
commuting decisions in the
event their costs increase
Adopt diferent prices
for transit use based on
distance travelled, zones
and peak use
Applies a current fat-
fee structure
Primary principle is that
benefciaries of a service
pay the cost. Avoids over-
consumption and use
Diferential pricing helps
ensure consumers pay based on
the marginal cost of providing
the service and reduces
incentives for overuse.
Reduce the use of planning
policies to regulate
density in favour of the
total construction, land
and infrastructure cost
approach
Uses planning policy
to regulate density
in order to reduce
growth costs
Municipal planning policies
that mandate higher
densities unnecessarily
increase housing costs and
reduce the total economic
welfare of Calgarians
Accounting for the true cost
of development enables
Calgarians to make housing
and occupancy choices that
minimize their own costs and
reduce or eliminate the tax-
supported infrastructure costs
that would accrue to the City.
39
1. The Overton Window is a public policy communication device used to show a range of policy options and their current po-
litical acceptability. It allows research institutes to express a wide range of ideas while being respectful of political reality.
The spectrum displays policy ideas with increasing reform ambition while the ‘“window” shows positions that are currently
used or contemplated.
2. The CMHC approach is more reliable, as it is based on direct cost comparisons by built form type. The Plan It Calgary ap-
proach is based on costs of dispersed versus more-compact development in Calgary. This paper assumes that the dispersed
infrastructure costs are associated with single-family development, while the compact form of development is associated
with condo and townhome development.
NOTES
1. Altus Group. Construction Cost Guide. Street Smart, Word Wise. 2013.
2. Avison and Young. Calgary Investment Review. 2011. First Quarter.
3. Brueckner, J.K. “Urban Sprawl: Diagnosis and Remedies.” International Regional Science Review 23, 2: 160-171. 2000.
April.
4. Calgary Chamber of Commerce. Municipal Land Development Policies and Regulations and the Impact on Calgary Hous-
ing Afordability. Calgary Chamber of Commerce. 2008. May.
5. Canada Mortgage and Housing Corporation. Comparing Canadian New Urbanist and Conventional Suburban Neighbour-
hoods (Updated). Socio-economic Series 13-002. 2013. February.
6. Canada Mortgage and Housing Corporation. Government-imposed Charges on New Housing in Canada (2009). Socio-
economic Series 10-022. 2010. November.
7. Canada Mortgage and Housing Corporation. Life Cycle Costing Tool for Community Infrastructure Planning. Socio-eco-
nomic Series 08-001. 2008. May.
8. Canada Mortgage and Housing Corporation. Brownfeld Redevelopment for Housing: Case Studies. Socio-economic Series
06-015. 2006. August.
9. Canada Mortgage and Housing Corporation. Smart Growth in Canada: A Report Card. Socio-economic Series 05-036.
2005a. December.
10. Canada Mortgage and Housing Corporation. The Impact of Zoning and Building Restrictions on Housing Afordability.
Socio-economic Series 05-012. 2005c. April.
11. Canada Mortgage and Housing Corporation. Brownfeld Redevelopment for Housing: Literature Review and Analysis.
Socio-economic Series 05-013. 2005b. April.
12. Canada Mortgage and Housing Corporation. Infrastructure Costs Associated with Conventional and Alternative Develop-
ment Patterns. Socio-economic Series Issue 26. 1995.
13. Canadian Homebuilders’ Association. The CHBA Poll Pulse Survey. 2013. Winter.
14. Ewing, R. and R. Cervero. “Travel and the Built Environment: A Synthesis.” Transportation Research Record, 1780: 87-
114. 2010.
15. Cervero, R. Integration of Urban Transport and Urban Planning. The World Bank Institute, Washington, D.C., 407-427.
2001.
16. City of Calgary. Calgary Snapshots 2013. Land Use Planning & Policy Planning, Development & Assessment. 2013a. June.
17. City of Calgary. Evaluation of Funding and Financing Tools and Mechanisms for Growth. Land Use Planning & Policy
Planning, Development & Assessment. 2013b. April. Available at http://www.calgary.ca/PDA/DBA/Pages/Corporate-
Framework-for-Growth-and-Change.aspx?redirect=/growthmanagement. Accessed August 27, 2013.
18. City of Calgary. Calgary Snapshots 2012. Land Use Planning & Policy Planning, Development & Assessment. 2013. March.
19. City of Calgary. Corporate Framework for Growth and Change. Planning & Policy Planning, Development & Assessment.
2012. May. Available at http://www.calgary.ca/PDA/DBA/Pages/Corporate-Framework-for-Growth-and-Change.
aspx?redirect=/growthmanagement. Accessed August 28, 2013.
WORKS CITED
40
20. City of Calgary. Methodology for Calculating Charges for Redeveloping Communities. Land Use Planning & Policy
Planning, Development & Assessment. 2011a. August.
21. City of Calgary. Summary of UDI/City Negotiated Agreement. 2011b. April.
22. City of Calgary. Financing Municipal Infrastructure: Sharing the Capital Costs and Financial Risk of Residential
Growth in Calgary. 2010.
23. City of Calgary. The Implications of Alternative Growth Patterns on Infrastructure Costs. IBI Group. 2009. April.
24. City of Calgary. Financing Growth Study: Sustainable Growth, Equitable Financing. Development and Building Ap-
provals. 2005. January.
25. Cox, W. How Urban Density Intensifes Trafc Congestion and Air Pollution. Wendell Cox Consultancy. 2000.
26. Doherty, M. Funding Public Transport Development through Land Value Capture Programs. 2004.
27. Farris, T. “The Barriers to Using Urban Infll Development to achieve Smart Growth.” Fannie Mae Foundation. Hous-
ing Policy Debate, Vol. 12, Issue 1. 2001.
28. Fischel, W. A. An Economic History of Zoning and a Cure for Its Exclusionary Efects. Department of Economics. Dart-
mouth College, Hanover, NH 03755. 2001. December.
29. Glaeser, E.L. and J. Gyourko. “The Impact of Building Restrictions on Housing Afordability.” Federal Reserve Bank of
New York Economic Policy Review. 2003. June.
30. Junge, J.R. and D. Levinson. “Financing Transportation with Land Value Taxes: Efects on Development Intensity.”
Journal of Transport and Land Use. Vol. 5 No. 1.1 pp. 49-63. 2012. Spring.
31. Kitchen, H. and R. Lindsey. Financing Roads and Public Transit in the Greater Toronto and Hamilton Area. Residential
and Civil Construction Alliance of Ontario. 2013. January.
32. Kitchen, H. Municipal Infrastructure Financing: A Prescription for the Future. Trent University. 2006. February.
33. Litman, T. Smart Growth Savings: What We know about Public Infrastructure and Service Cost Savings, and How
They are Misrepresented by Critics. Victoria Transport Policy Institute. 2013. April.
34. Mayer, C. and C.T. Somerville. Land Use Regulation and New Construction. 2000. March.
35. McConnell, V. and K. Wiley. Infll Development: Perspectives and Evidence from Economics and Planning. Resources
for the Future. 2010.
36. Saks, R.E. Job Creation and Housing Construction: Constraints on Metropolitan Area Employment Growth. Federal
Reserve Board, Finance and Economics Discussion Series. 2005.
37. Skaburskis, A. and R. Tomalty. “The Efects of Property Taxes and Development Cost Charges on Urban Development:
Perspectives of Planners, Developers and Finance Ofcers in Toronto and Ottawa.” Canadian Journal of Regional Sci-
ence. 303-325. 2000.
38. Slack, E. The Impact of Municipal Finance and Governance on Urban Sprawl. Institute on Municipal Finance and Gov-
ernance, Munk Centre for International Studies, University of Toronto. 2006. September.
39. Smith, J.J. and T.A. Gihring, with T. Litman. Financing Transit Systems through Value Capture: An Annotated Bibliog-
raphy. Victoria Transport Policy Institute. 2012. December.
40. Song, Y. and G.-J. Knaap. “Measuring the Efects of Mixed Land Uses on Housing Values.” Regional Science and Urban
Economics. 34. 663–-680. 2004. May.
41. Urbis. National Dwelling Cost Study. National Housing Supply Council. 2011. May.
42. Vander Ploeg, C. New Tools for New Times: A Sourcebook for the Financing, Funding and Delivery of Urban Infra-
structure. Canada West Foundation. 2006. September.
43. Vander Ploeg, C. with B. Brunnen. A Capital Question: Infrastructure in Western Canada’s Big Six. Canada West Foun-
dation. 2003. October.
41
ABOUT THE AUTHOR
BEN BRUNNEN, BA, MPA, is an independent policy,
economic and advocacy consultant. Brunnen is formerly the Director of Policy and
Government Afairs and Chief Economist with the Calgary Chamber of Commerce, and he has
over 10 years of experience in the areas of applied economics, public policy and government
relations. Brunnen has worked for the British Columbia Ministry of Municipal Afairs and the
Canada West Foundation. He has published and consulted in the areas of municipal fnance,
economic development, energy policy, economic forecasting, and skills and labour shortages.
42
MUNICIPAL PAPERS SERIES
The Manning Foundation is building intellectual capital for municipal governance in fve streams of public policy
enquiry. Each stream will include a series of public policy papers designed to stimulate new thought about the role
of municipal government in society. Manning Foundation research papers are placed in the public domain via the
Foundation’s website and are available for review, debate, criticism and support by Canadians regardless of their
political afliation.
1. ORGANIC CITIES
An enquiry into how cities grow and what role government should play in regulating growth and providing
infrastructure, with the goals of economic efciency and liveability. Much of the debate around municipal
development is based around what urban forms are desirable, with sprawlers and smart growthers alike arguing that
land-use regulation and infrastructure provision should favour their ‘optimal’ urban form.
The Organic Cities project takes a diferent perspective: that what is important is not the urban form that emerges,
but the processes that are in place, particularly the role of government. On this view, it is more important that the
market is left free to serve consumer demand, with the important constraints being property rights and the real costs
of infrastructure provision rather than land-use regulations.
Upcoming papers include enquiries into the proper pricing of muncipal services generally and a more specifc report
on the politics of implementing real time road pricing.
2. APPROPRIATE ACTIVITIES
An enquiry into the optimal role of government, with a positive analysis of what municipal government currently
does and a normative analysis of what roles government is best equipped to fll. These roles broadly divide into an
ownership role, a regulatory role and an expenditure role, each of which can be over or under played. This stream
builds on concepts such as market failure, public goods and subsidiarity to identify which activities municipal
government does or does not have a comparative advantage over other levels of government.
Upcoming papers include enquiries into the proper role of municipal government as a regulator and as a distributor of
wealth.
43
3. CITIZEN SOVEREIGNTY
An enquiry into how well citizens can hold government to account, including monitoring of its activities and
protecting their natural rights. This stream investigates standards of municipal accounting and performance
reporting, open government, public safety and intergenerational equity. It considers concepts such as open
government and open data, and property rights.
Future papers in this series include enquiries into the quality of performance reporting, intergenerational equity with
respect to municipal government and open data projects.
4. THE OPEN SOCIETY
Open societies share power among a range of diferent institutions, unlike closed societies where it is vested in just
one. The Open Society is an enquiry into the role of diferent institutions in the city, including the church, charities
and associations. This stream has a historical element, it considers how these diferent elements have interacted in
the past and may do so in the future.
Published papers include an account of the role of civil society in building Calgary.
5. MUNICIPAL ISSUE PAPERS
This stream covers basic elements of public policy, including an introduction to the role of government at
municipal level, briefngs on areas of municipal policy and issue papers framed in terms of values, facts and ideas
of conservatism applied to municipal policy. Particularly salient policy areas include public safety, mobility and
afordability.
MANNING FOUNDATION FOR DEMOCRATIC EDUCATION
www.manningfoundation.org
[email protected]
403.536.8585
514 11 Ave SW
Calgary, AB T2R 0C8
44
doc_695845597.pdf
The key is to charge the growth related infrastructure, operational and life cycle costs to the appropriate benefting areas.
1
MANAGING THE
COSTS OF GROWTH
BEN BRUNNEN
OCT 7, 2013
KEY POINTS
• On the one hand, growth is a sign of prosperity and can help drive economic activity; on the other hand,
a growing population brings with it new infrastructure costs and demands on existing services.
• Policies that seek to encourage high-density development as a means of reducing municipal
infrastructure costs focus on a very narrow component of the costs of growth, and could actually lead to
higher total housing costs.
• It is only in the context of total construction, land, and operating-cost comparisons that policy-makers
and citizens can meaningfully understand the true costs of growth and make informed decisions.
• The key is to charge the growth related infrastructure, operational and life cycle costs to the appropriate
benefting areas. This enables Calgarians to make housing and occupancy choices that minimize their
costs and reduces or eliminates the tax-supported infrastructure costs that would accrue to the City.
2
3
WHEN ACCOUNTING FOR TOTAL
CONSTRUCTION, INFRASTRUCTURE,
OPERATING, LAND AND LIFE CYCLE
COSTS BY BUILT FORM – AND
CONTROLLING FOR OCCUPANCY
LEVELS – SINGLE-FAMILY HOMES
ARE THE LEAST EXPENSIVE FORM
OF DEVELOPMENT.
4
Managing growth and development within
a city can be challenging. On the one hand,
growth is a sign of prosperity and can help drive
economic activity; on the other hand, a growing
population brings with it new infrastructure
costs and demands on existing services.
Municipalities that accommodate growth
without sufcient compensation for the costs
create structural funding gaps that can only be
closed through other means of fnancing.
Municipalities generally apply both economic
and planning policies to managing growth-
related costs. Planning policy has tended
to focus on encouraging smart growth
development (high-density, mixed-use, transit-
oriented development) in both new and existing
communities. Economic policy can be used to
address the core market failures associated
with development and to encourage residents
to make informed decisions about where to live,
work and commute based on user pays.
This paper undertakes a review of the
planning and economic literature to compare
infrastructure costs in new versus developed
communities and by density of development,
and it identifes strategies for managing growth
and applies the fndings in a Calgary context.
UNDERSTANDING
AND MANAGING
GROWTH-RELATED
INFRASTRUCTURE
COSTS
5
KEY
FINDINGS
1. INFRASTRUCTURE
COSTS BY TYPE OF
DEVELOPMENT
Overall, initial infrastructure costs in low-density new
developments tend to be higher per unit than they are
in smart growth developments, largely because the
costs are spread over more units and non-residential
uses. However, in smart growth communities, the
costs per square foot are higher, as higher density
development involves higher construction costs.
The higher per unit costs of lower density growth
are attributable to the need to build longer linear
forms of infrastructure (roads, storm sewers, water
and wastewater pipe), whereas the population-
based costs (police, fre, parks and recreation,
water and wastewater treatment) are comparable
for all residential built forms. Although costs are
slightly lower per unit in higher density scenarios,
interestingly, life cycle infrastructure costs are
comparable for both smart growth and low-density
development.
The literature and public discussions of infrastructure
costs tend to overlook the construction and land
costs of diferent built forms. All things being equal,
construction costs for higher density development are
more per square foot. It is only in the context of total
construction, land- and operating-cost comparisons
that policy-makers and citizens can meaningfully
understand the true costs of growth and make
informed decisions accordingly. According to the
City of Calgary, the Canada Mortgage and Housing
Corporation (CMHC) and private sector cost models,
when accounting for total construction, infrastructure,
land and 60-year life cycle costs by built form – and
controlling for occupancy levels – single-family
homes are the lowest cost form of development in
Calgary. This is largely the result of lower construction
costs per square foot and the economies of scale in
their occupancy (2.91 persons per unit in single-
family versus 1.81 persons per unit in multi-family).
These savings more than ofset higher single-family
infrastructure, operating and life cycle costs per unit
relative to other built forms.
The implication is that planning policies that seek to
encourage high-density development as a means of
reducing municipal infrastructure costs focus on a
very narrow component of the costs of growth, and
they could actually lead to higher total housing costs
(including unit and infrastructure costs) depending on
the housing and occupancy preferences of Calgarians.
It is in the context of total construction and operating-
cost comparisons that policy-makers and citizens can
meaningfully understand the true costs of growth and
make informed decisions accordingly.
6
APPROACHES TO
MANAGING GROWTH-
RELATED COSTS
A. PLANNING POLICY
Planning policies generally focus on achieving smart
growth objectives in new and existing communities.
SMART GROWTH AND EXISTING
COMMUNITIES
Policies that promote smart growth in existing
communities generally have less than stellar success.
Key obstacles include complex approval and zoning
regulations, the need for community support,
difculties securing fnancing and challenges in
terms of assembling land parcels. Perhaps the biggest
problem is resident opposition, as densifcation has
the potential to increase congestion, reduce green
space and increase stress on existing infrastructure.
Smart growth policies can also lead to higher housing
costs and create overall afordability difculties for the
community. Regulatory and zoning reforms are critical
for helping to alleviate these challenges and achieve
smart growth objectives.
SMART GROWTH AND NEW
COMMUNITIES
Policies that promote smart growth in new
communities will help alleviate the need for future
intensifcation. While smart growth policies are likely
to improve density of development and mobility choice
within communities, in the absence of efcient pricing
for transportation infrastructure, the increased use of
public transit and work-home collocation objectives
of smart growth are not likely to be successful. Smart
growth policies also have the potential to alienate key
segments of the population and could drive growth
to the fringes of the municipality, creating adverse
spillover efects.
B. ECONOMIC POLICY
As an alternative (or complement) to planning
regulation, economic policy seeks to address the
key market failures of growth: failure to ensure that
new development pays for the infrastructure costs
of growth, failure to account for the social costs of
congestion and failure to account for the benefts of
open space.
PAYING FOR THE COSTS OF
DEVELOPMENT
New development imposes costs on a municipality in
terms of initial capital costs, operating, maintenance
and life cycle infrastructure costs. Good economic
policy ensures that the initial capital costs are
borne by developers through marginal cost pricing
while households or communities that beneft pay
the ongoing operating and life cycle costs through
diferential tax rates, user fees and/or levies.
PAYING FOR THE COSTS OF ROADS
Ideally, roads should be user pay. In the absence of
tolling authorities, a second-best approach would be to
7
assign the ongoing operation and life cycle costs to the
communities that beneft through diferential taxes in
proportions similar to development levy formulas.
PAYING FOR THE COSTS OF
TRANSIT
The most-direct benefciaries of transit are the users
of the service. Fares are generally average-cost based,
but they should be based on distance travelled and
time of use in order to discourage urban sprawl and
to encourage transit use for short trips. Zone and
peak-time pricing could efectively accomplish these
objectives. To the extent that external benefts arise
through a reduction in pollution and congestion costs,
some subsidization is justifed, particularly if funded
via a roads-based charge such as a gasoline tax.
PAYING FOR THE COSTS OF OPEN
SPACE
When cities grow outward, developers often purchase
land used for agricultural purposes. This may result
in the loss of community access to open space.
Municipalities can address this by establishing green-
space requirements in new developments as well
as earmarking sensitive areas for environmental
protection and use.
8
AS AN ALTERNATIVE (OR
COMPLEMENT) TO PLANNING
REGULATION, ECONOMIC POLICY
SEEKS TO ADDRESS THE KEY
MARKET FAILURES OF GROWTH:
FAILURE TO ENSURE THAT NEW
DEVELOPMENT PAYS FOR THE
INFRASTRUCTURE COSTS OF
GROWTH, FAILURE TO ACCOUNT
FOR THE SOCIAL COSTS OF
CONGESTION AND FAILURE TO
ACCOUNT FOR THE BENEFITS OF
OPEN SPACE.
9
2. APPLYING THE
RESEARCH IN A
CALGARY CONTEXT
A. PLANNING POLICY
In 2009, the City of Calgary adopted a new Municipal
Development Plan (MDP) to guide growth and
development in the City. This plan seeks to encourage a
more intensifed form of urban development and has as
its target the accommodation of a 33 per cent population
growth in developed areas over the next 30 years. As a
short-term goal, the City expects to accommodate an
additional 28,000 people in existing communities by
2019. However, from 2002 to 2012, Calgary experienced
a net loss of approximately 3,000 residents from existing
communities to the suburbs.
The City is also developing a strategic framework for
growth and change to help prioritize and sequence growth
to specifc targeted areas city wide. While the framework
is thorough, applying this approach in combination with
ambitious development targets in existing communities
(and the absence of major zoning or regulatory reforms to
facilitate redevelopment) will likely have a cascading efect
in terms of constraining development in the city.
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Revisit the City’s short to medium-term intensifcation
targets for existing communities in the MDP, with a
rebalance of population growth in new and existing
communities informed by the total construction, land
and infrastructure costs associated with various built
forms and occupancy counts per unit. This will enable
a more gradual approach to development within the
City, minimize potential spillover efects, enhance total
economic housing benefts for Calgarians and avoid
unnecessarily eroding housing afordability through
excessive regulatory and time constraints;
2. Streamline regulatory and zoning processes for
developments in existing communities, with a focus on
permitting higher density development in existing low-
density neighbourhoods;
3. Invest signifcant staf time and resources in
implementing the strategic framework for growth
and change, as both the literature and experience in
Calgary have demonstrated a need for partnership with
industry and a joint commitment to ensuring that such
projects are a success;
4. Introduce an afordability and diversity of housing
form sensitivity metric into the strategic framework
for growth and change informed by total construction,
land and infrastructure costs per person to ensure that
the framework is not inadvertently selecting more-
expensive, homogeneous developments or distorting
the market.
This modifed planning policy approach would help
garner greater public support for development initiatives
in existing communities, provide the City with greater
fexibility to adjust its policies as needed, provide
time for community groups and associations to align
their community plans with the MDP and enable the
development community to innovate and adjust their
business models accordingly.
10
PLANNING POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Introduce an afordability
and diversity of housing
form sensitivity metric into
the strategic framework
for growth and change,
informed by total
construction, land and
infrastructure costs per unit
Not included in the
framework
Need to ensure the
framework is responsive to
market demand and ofers a
diversity of housing choices
and price points based on
the actual costs of growth
and development in order to
maximize economic welfare
Sensitivity metrics help policy-
makers monitor the impact
of their decisions and make
adjustments over time.
Invest signifcant staf
time and resources in the
initial implementation of
the strategic framework for
growth and change
Not currently
contemplated
Both the literature and
experience in Calgary have
demonstrated a need for
partnership with industry
and joint commitment in
ensuring such projects are a
success
Investing substantial focus and
resources to implement the
strategic framework for growth
and change enables continuous
learning and adjustments to
ensure projects are a success
without adversely afecting
stakeholders. The lessons
learned can be applied to future
projects.
Revisit the City’s short- to
medium-term development
targets for existing
communities in the MDP,
with a more gradual
approach toward the
intensifcation of existing
communities, informed by
the total construction, land
and infrastructure costs
Target is to
accommodate a 33
per cent population
growth in developed
areas over the next 30
years
Targeting development
in existing communities
is a difcult approach to
managing growth. Complex
regulation, the need for
community support,
difculties securing fnancing
and challenges in terms of
assembling land parcels are
all at play.
A more gradual approach to
development within the city
helps ensure that citizens,
businesses and the public
sector have time to adjust
their business practices and
lifestyle choices. This approach
will also minimize spillover
efects, enhance total economic
housing benefts for Calgarians
and avoid unnecessarily
eroding housing afordability
through regulatory and time
constraints.
Streamline regulatory
and zoning processes for
developments in existing
communities, with a focus
on permitting higher
density development in low-
density neighbourhoods
City undertaking
Transforming
Planning initiative to
strengthen internal
approval processes.
Zoning reforms in
existing communities
are not currently
anticipated.
Complex regulation and
zoning policies are key
barriers to achieving
development targets in
existing communities.
Streamlining regulatory
and zoning processes helps
remove barriers to achieving
development targets in existing
communities.
M
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B. ECONOMIC POLICY
The City has stated that the current approach to
fnancing growth does not result in enough revenue
to recover costs. To address this difculty, the 2011
development levy agreement introduced a water and
sanitary sewer levy for the frst time since 1999, along
with new levies for bus and pedestrian infrastructure.
While Calgary development charges are now relatively
comprehensive, aside from storm sewers, all levies are
set on a city-wide basis using an average-cost approach,
which essentially subsidizes costlier developments
at the expense of more-afordable ones. A marginal
cost price approach would send better market signals
to prospective homebuyers in terms of the costs of
growth-related infrastructure and the services they use.
In addition, the City continues to fund infrastructure
maintenance and life cycle costs of growth out of the
general tax base as opposed to collecting them from
the benefting areas through tools such as special taxes,
local improvement levies or diferential residential tax
rates.
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD ALSO FOLLOW THESE
RECOMMENDATIONS:
5. Adopt a marginal cost approach to development
levies (as opposed to an average-cost approach) to
ensure that new development in each community
pays the actual infrastructure costs incurred. This
should apply to new and existing communities. This
approach can be achieved through, for example, the
use of catchment boundaries for water, sanitary,
storm and transportation infrastructure. The City
should target this change in time for the next
development levy negotiation with the industry in
2015;
6. Calculate maintenance, operating and life cycle
infrastructure costs associated with new growth
(roads, recreation, police, fre, EMS) and assign
these costs to the residential units or communities
that beneft (through various tools such as a
special tax, a local improvement levy or diferential
residential-tax rates) using a marginal cost
approach. This approach should also apply to utility
fees. Accounting for the true cost of development
enables Calgarians to make housing and occupancy
choices that minimize their own costs and reduce or
eliminate the tax-supported infrastructure costs that
would accrue to the City;
7. Reduce the use of planning policies to regulate
density in favour of the total construction, land and
infrastructure cost approach for managing growth.
This will lead to a more-efcient, market-based
approach to growth management and will better
enable Calgarians to make informed housing choice
and occupancy decisions based on total costs, and it
will reduce overall costs for the City;
8. Adopt diferent prices for transit use based on
distance travelled, zones and peak use as opposed to
the current fat-fee structure. This will help ensure
that consumers pay based on the marginal cost of
providing the service, and it will reduce incentives
for overuse; and
9. Phase in any tax burden shifts over a fve- to 10-year
period to ensure Calgarians have time to adjust their
work, home and commuting decisions accordingly.
12
ECONOMIC POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Adopt a marginal cost
approach to development
levies in existing and new
communities
City negotiates
development levies
based on average cost
Marginal cost pricing is
efcient. Better directs
growth based on cost
Ensures new development in
each community pays the actual
infrastructure costs incurred
(as opposed to more-expensive
developments being subsidized
by lower cost developments)
Calculate and assign
infrastructure operating
and life cycle costs
to communities and
households
Funded out of the
general tax base
Primary principle is that
benefciaries of a service pay
the cost. Avoids structural
infrastructure defcits
Helps citizens make more-
informed decisions about
housing costs and choice based
on the true cost of growth.
Reduces or eliminates tax-
supported infrastructure costs
associated with growth
Phase in any tax burden
shifts over fve to 10 years
N/A Ensures stability for
citizens and the City in
terms of understanding tax
obligations and revenue
expectations
Ensures Calgarians have time
to adjust their work, home and
commuting decisions in the
event their costs increase
Adopt diferent prices
for transit use based on
distance travelled, zones
and peak use
Applies a current fat-
fee structure
Primary principle is that
benefciaries of a service
pay the cost. Avoids over-
consumption and use
Diferential pricing helps
ensure consumers pay based on
the marginal cost of providing
the service and reduces
incentives for overuse.
Reduce the use of planning
policies to regulate
density in favour of the
total construction, land
and infrastructure cost
approach
Uses planning policy
to regulate density
in order to reduce
growth costs
Municipal planning policies
that mandate higher
densities unnecessarily
increase housing costs and
reduce the total economic
welfare of Calgarians
Accounting for the true cost
of development enables
Calgarians to make housing
and occupancy choices that
minimize their own costs and
reduce or eliminate the tax-
supported infrastructure costs
that would accrue to the City.
M
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13
1. INTRODUCTION
Managing growth and development within a city can
be challenging. On the one hand, growth is a sign of
prosperity and can help drive economic activity. On the
other hand, a growing population brings with it new
infrastructure costs and demands on existing services.
Municipalities that accommodate growth without
sufcient compensation for the incremental costs
run the risk of creating structural funding gaps that
can only be closed through other means of fnancing.
Often, municipalities will subsidize this growth at the
expense of existing taxpayers.
Municipalities generally apply both economic and
planning policies to managing growth-related costs.
Planning policy tends to focus on encouraging smart
growth development (high-density, mixed-use,
transit-oriented development) in new and existing
communities to minimize growth-related costs.
Although this approach can be helpful in setting
the overall direction for the desired spatial design
of a municipality, it is limited in terms of its efect
on growth management due to its inability to direct
market dynamics and consumer demand.
A complementary and, perhaps, more efective
approach to encouraging efcient growth and
development is economic policy. This approach helps
address the core market failures associated with
expansive development and encourages residents to
make informed decisions about where to live, work and
commute based on cost of use.
This paper undertakes a review of the planning
and economic literature to compare infrastructure
costs and to identify approaches and best practices
for managing growth, and it applies the fndings to
Calgary, with recommendations for change based on
the Overton Window approach.
1
Section 1 undertakes
a review of the comparisons of infrastructure costs in
new and developed communities; section 2 compares
the regulatory and economic approaches for managing
growth in new and existing communities; and
section 3 applies the fndings to Calgary and makes
recommendations for change.
2. INFRASTRUCTURE COSTS
IN NEW AND DEVELOPED
COMMUNITIES
The infrastructure costs associated with growth
generally consist of local roads within new
developments; expansion of arterial roads servicing the
community; new transit infrastructure (bus stops, train
stations, buses); water and wastewater distribution
and facilities; storm sewers; new police, fre and
EMS stations; neighbourhood parks and pathways;
recreation facilities; libraries; planning and regulation;
and social service and administrative supports (City of
Calgary 2005:45 Financing Growth).
In addition to building the infrastructure, which
represents a one-time cost, there are also the ongoing
operating and life cycle costs to consider. Operating
costs refer to the expenditures required to keep
the infrastructure running, and life cycle costs are
the maintenance, renewal and rehabilitation costs
associated with the useful life of the asset (Vander
Ploeg and Brunnen 2003:25). These all need to be
considered and accounted for in understanding the
costs of managing growth.
14
2.1 COMPARING COSTS BY DENSITY IN
NEW COMMUNITIES
New development in greenfeld areas can be built to
accommodate high- or low-density units. Each has a diferent
infrastructure cost profle. The CMHC (1995) undertook
a comparison of the infrastructure costs of a conventional
suburban development versus a smart growth (high-density,
mixed-use, transit-oriented) development. The smart
growth plan had 71 per cent more dwelling units (units per
hectare at 43 versus 22 for the suburban development), 20
per cent more recreation and open space and more than
twice the amount of commercial land. The study found
that initial capital costs per unit were 16 per cent lower
($5,300 per unit) in the smart growth plan. These savings
were largely attributed to the higher residential density that
spread the costs over more units and the higher proportion
of non-residential land in the area, which reduced the
apportionment of total costs to the residential sector. The
study also found that the smart growth plan generated life
cycle cost savings of $11,000 per unit over 75 years, or $147
per unit annually.
While these fndings indicate that the more-compact form
of development results in lower per unit infrastructure
costs, the challenge with this study is that it does not
necessarily take into consideration infrastructure costs per
square foot of development or the number of occupants in
the community. These metrics would help provide more-
objective measures of the relative costs of each form of
development. Interestingly, the life cycle costs of smart
growth development are comparable to those of suburban
development, with savings of $147 per unit annually in
the smart growth model. Using a more recent life cycle
infrastructure-costing tool, CMHC (2008:7) found that
for most of the cost categories, the neo-traditional
[smart growth] households are estimated to have a
lower annual cost than the conventional development.
Hard infrastructure and linear infrastructure costs
[roads, water and wastewater facilities] show the
highest degree of reduction, at 25 per cent less cost.
On the other hand, the municipal costs—such as
fre, police and waste management—that are more
directly proportional to population, not density of
development, are similar in both scenarios.
In a similar vein, the City of Calgary estimated the
incremental infrastructure costs of accommodating an
additional 1.3 million people over 60 years through a
dispersed (as opposed to densifed) growth pattern at 11.2
billion city wide, or $145 per new resident per year (City
of Calgary 2008:ii). Total operating costs were much more
comparable, with a total net diference of $130-million over
60 years, or $1.67 per person per year.
The most signifcant capital costs were attributed to roads,
which would require more length and use in the dispersed
scenario as well as higher maintenance and reinvestment
costs (City of Calgary 2009:ii). For water and wastewater
systems, more pipe would be needed to service more
development; however, treatment facility costs (new water
and sewer plants) would be similar in both scenarios, as these
costs are population, not density, based. Similarly, fre service
costs would be lower due to less need for new stations, but
engine and personnel costs would be similar, while police,
parks and recreation costs would be comparable.
Generally, the higher per unit costs of lower density growth
are attributable to the need to build longer linear forms
of infrastructure (roads, storm sewers and water and
15
wastewater pipe), whereas the population-based
costs (police, fre, parks and recreation, water and
wastewater treatment) are comparable. Once the
initial infrastructure costs are incurred, the operating,
maintenance and life cycle costs per unit are higher for
lower density development, but they are comparable.
2.2 COMPARING COSTS IN NEW
AND EXISTING COMMUNITIES
When comparing development costs in new versus
existing communities, the infrastructure cost profle
is very diferent. In new communities, all of the initial
capital costs needed to service a community (roads,
water and wastewater pipe and facilities, sidewalks,
etc.) would be required. For existing communities, not
all of these new infrastructure assets are necessarily
needed. Because some of the infrastructure to
accommodate growth in existing communities may
already be in place, the new infrastructure construction
costs would likely be lower at the outset.
However, there may be some additional investments
needed in existing communities. Water and wastewater
facilities and distribution lines could require additional
upgrades to accommodate higher population densities
(City of Calgary 2011a:9). There is also an incremental
demand on transportation infrastructure, police and
fre services, parks and recreation and social services
associated with densifcation, but these population-
based costs are likely comparable to those that would
be incurred in new development.
Construction costs in existing communities, however,
tend to be higher than in greenfeld areas, as crews
need to operate within the built environment, which
is more complex, regulatory burdensome and has
a narrower margin for error than does a greenfeld
setting. Some studies suggest that redevelopment
construction costs can be as much as 25 per cent
higher than in greenfeld areas for comparable units
(Urbis 2011).
Overall, it is difcult to determine precisely the extent
to which infrastructure costs difer in new versus
existing communities. According to the City of Calgary
(2013a:6):
Capital costs of road and transit construction
depend on the size of a community and
the distance to various destinations such
as employment centres, shopping centres
and the downtown core. Capital costs of
waterworks and sanitary sewers depend on
population, the total distance of transmission
and distribution system, the cost of treatment
facilities and the topography of the
development area.
Thus, infrastructure cost comparisons in new versus
existing communities will largely be community
specifc. Ewing (1997, as cited in Litman 2013:8) ofers
these general relationships:
• Costs are low in rural areas where households
provide their own services.
• Costs increase in suburban areas where services
are provided to dispersed development.
• Costs decline with clustering and as densities
increase from low to moderate.
• Costs are lowest for infll redevelopment in areas
16
with adequate infrastructure capacity.
• Costs tend to increase at very high densities due to
congestion and high land costs.
2.3 GROWTH, CONSTRUCTION AND
LAND COSTS
An area often overlooked in the literature and public
discussions of infrastructure costs is the construction
costs of diferent built forms. All things being equal,
higher density development costs more. High-density
developments have diferent building requirements
and material inputs such as elevators, sprinklers,
basements and fre stairs/safety requirements that
result in higher costs.
Altus (2013) publishes an annual handbook detailing
construction costs in various municipalities across
Canada. This handbook is widely used by builders
and developers to estimate project costs for a given
building type and year. When considering the costs per
spare foot of three comparable built forms – medium-
quality single detached house, timber frame medium-
quality townhouse and medium-quality condo/
apartment in Calgary – average single-family home
costs are the least expensive ($145/sq. ft.), followed by
townhomes ($148/sq. ft.). Condo/apartments are the
most expensive ($245/sq. ft.).
This creates an interesting dynamic. When capital
infrastructure, life cycle, maintenance and operating
costs are lower per unit for smart growth residential
development and construction costs per square
foot are higher, there is the potential that smart
growth development actually raises the cost of home
ownership, depending on the housing choice and
occupancy preferences of Calgarians.
Approaching growth management issues based on the
total construction costs per unit makes good sense;
after all, the total construction costs of a residential
unit not only include the cost of building the residence,
but also the cost of building the capital infrastructure
as well as the operating, maintenance and replacement
costs of both. Focusing on the public infrastructure
component alone is only part of the equation. It is in
the context of total construction and operating cost
comparisons that policy-makers and citizens can
meaningfully understand the true costs of growth and
make informed decisions accordingly.
Table 1 estimates the construction and infrastructure
costs of the three comparable built forms discussed
previously. Average square footage per unit estimates
are based on the 2013 Canadian Homebuilder Survey
(2013: 11). Occupant rates (persons per unit) are
based on average suburban single-family and multi-
family numbers for Calgary in 2011 (City of Calgary
2013a:63). The infrastructure costs are calculated
based on two scenarios: The CMHC infrastructure cost
model compares infrastructure costs in smart growth
communities versus traditional suburban development
(1995) adjusted for infation, and the City of Calgary
Plan It Calgary model estimates costs associated
with a dispersed and a compact form of development
(2009)
2
. Greenfeld land prices are derived from
recent sale prices in Calgary, using an average sale
price of $210,000 per acre (Avison and Young 2011:6).
Land per unit is assigned at 4,000 sq. ft. for single-
17
family homes, 1,000 sq. ft. for townhomes (including
communal area proportions) and 550 sq. ft. for condo/
apartments (based on four-story development and
including communal area proportions).
Not surprisingly, average construction costs per unit
are the highest for the single-family household at
$290,000 (2,000 sq. ft.). Condo/apartment unit costs
are second highest at approximately $270,000 (1,100
sq. ft.) and townhome units are the most afordable
at $206,500 (1,400 sq. ft.). When accounting for
capital infrastructure, operating, land and 60-year
life cycle costs, the disparity increases. Under the
CMHC scenario, a single-family home is approximately
$68,000 more than a condo/apartment and nearly
$120,000 more than a townhouse. Under the Plan It
Calgary scenario, the single family home is $82,000
more than a condo/apartment and $142,000 more
than a townhome.
That said, dwelling units alone do not account for
population growth. Single-family homes in Calgary
have higher occupants per unit relative to townhomes
and condo/apartments. According to the City of
Calgary (2013a:63):
In 2011 there was an average of 2.88 people per
single-family dwelling unit, while each multi-
family dwelling unit averaged 1.81 people. Also,
as the newer suburbs have a higher proportion
of young families, occupancy is higher there than
in the developed areas. Overall, the new suburbs
have an occupancy rate of 2.91 people per unit.
Based on current occupancy trends, accommodating
more people in higher density developments would
require more units:
[We] expect occupancy to remain around this
low level for at least the near term as more
multi-family units with lower occupancy rates
are built …. An increase in the community’s
density often requires a larger proportion of
multi-residential dwellings, which typically
accommodate fewer people. As such, the
relationship between population and units is not
proportionate (City of Calgary 2013a:63).
Given these dynamics, it is instructive to equalize
construction costs by occupant rates, as this will give a
more accurate picture of the costs of accommodating
population growth. Under the CMHC model, when
controlling for occupant counts, a 2,000-square-foot
home is approximately $75,000 cheaper (including
construction, infrastructure, land and 60-year
operating and life cycle costs) than a 1,100 square
foot condo/apartment and $41,000 cheaper than
a 1,400-square-foot townhouse. Under the Plan It
Calgary model, a 2,000-square-foot single-family
home is $35,000 cheaper than a 1,100-square-
foot condo/apartment and $2,000 cheaper than a
1,400-square-foot townhouse.
These fndings suggest that when accounting for total
construction, infrastructure, operating, land and
life cycle costs by built form – and controlling for
occupancy levels – single-family homes are the least
expensive form of development. This is largely the
result of lower construction costs per square foot and
18
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19
economies of scale in their occupancy (whereby more
people are accommodated per unit). These savings
more than ofset their higher total infrastructure, land,
operating and life cycle costs relative to other built
forms.
2.4 SUMMARY OF
INFRASTRUCTURE COST FINDINGS
Overall, initial infrastructure costs in low-density new
developments tend to be higher per unit than they are
for higher density developments, largely because the
costs are spread over more units and non-residential
uses. However, the costs per square foot are also
higher, as higher density development involves
higher construction costs. Interestingly, life cycle
infrastructure costs are comparable for both types of
development, although they are slightly lower per unit
in higher density scenarios.
When accounting for total construction costs
(including capital infrastructure, operating,
maintenance and life cycle costs), land costs and
number of occupants, single-family homes are the
least expensive form of development, as they ofer
economies of scale in their ability to accommodate
more occupants than other built forms do. For local
governments to make informed public policy choices
about the costs of growth, these costs need to be
considered together as the total cost of built forms.
In setting growth management policy and assigning
costs, local governments are encouraged to attribute
the capital infrastructure, operating and life cycle
costs to the benefting residential unit and account for
occupancy levels by unit type. This approach would
enable Calgarians to make housing and occupancy
choices that minimize their own costs and reduce
or eliminate the tax-supported infrastructure costs
associated with growth that would accrue to the City.
20
3. APPROACHES FOR
MANAGING GROWTH-
RELATED COSTS
Understanding infrastructure costs is the frst step to
understanding how best to manage growth-related costs.
In order to manage these costs, local governments have
two general mechanisms available: planning policy and
economic policy. This section compares these separate
approaches to managing growth-related costs in existing
and new communities and their respective strengths and
weaknesses.
3.1 PLANNING POLICY
Planning policy, in the form of zoning requirements,
is generally the preferred tool for municipalities for
managing growth. Through smart growth policies,
zoning is utilized to manage long-term infrastructure
costs by encouraging high-density, mixed-commercial
and residential-use communities that are oriented
around transit nodes. This is achieved through tools
such as density minimums and smart growth design
requirements in new developments, limitations on the
amount of new greenfeld developments available and
pro-intensifcation policies in existing communities.
3.1.1 SMART GROWTH IN EXISTING
COMMUNITIES
The intensifcation of existing communities has been a
key objective identifed by policy-makers and planners
to manage growth; however, intensifcation policies
have been met with less than stellar success. In a review
of the empirical literature on densifcation and infll
development, McConnell and Wiley (2010:26) conclude:
[T]here is not strong evidence that policies
implemented to promote infll, such as Urban
Growth Boundaries and Priority Funding
Areas, have worked. The combination of local
government control over land use, economic
costs, household preferences for housing
types, and neighborhood opposition, presents
formidable obstacles to any such policy.
A review of the experience in Portland, Oregon, which
has imposed an urban growth boundary, suggests that
density did not necessarily increase in the community
relative to other cities, and “growth in the Portland
area may have been pushed into other adjacent low-
density areas that were not subject to the restrictions”
(McConnell and Wiley 2010:5).
The CMHC (2005a) published a report card on smart
growth in Canada and concluded, “[T]here is a large gap
between the stated growth management policies found
in the planning documents of the six study regions and
accomplishments on the ground. While major progress
has been made in terms of language and policy goals,
performance is lagging behind considerably.”
Key obstacles to implementing intensifcation include
urban area permitting and approval processes that
require multiple hearings and strong community
infuence in the process; complex or stringent
building and zoning requirements that increase the
costs of development; a lack of community support;
21
diferent fnancial and risk profles of intensifcation
development; and challenges in terms of assembling
land parcels for development (McConnell and Wiley
2010:5, Farris 2001).
Perhaps the biggest challenge to intensifcation is
resident opposition. Densifcation has the potential to
increase congestion, reduce green space, increase stress
on existing infrastructure and create more social issues
in existing communities (Litman 2013:8, McConnell
and Wiley 2010:5). In essence, the costs are localized
while the benefts are regionalized, and some studies
have even found that intensifcation can reduce the
house prices of adjacent properties, depending on the
nature of the development.
Indeed, in a study of mixed land uses on housing values,
Song and Knaap (2004) fnd “housing prices increase
with their proximity to—or with increasing amount
of—public parks or neighborhood commercial land
uses …. [H]ousing prices are higher in neighborhoods
dominated by single-family residential land use ….” The
authors also fnd, “[H]ousing prices tended to fall with
proximity to multi-family residential units.”
Given that a home is the single-largest investment many
families will make, it is natural for homeowners to
want to protect their investment. In a discussion of the
evolution of zoning, Fischel (2001:8) asserts, “Among
its most prominent advantages was protection of
home values, especially in the suburbs, because zoning
forestalled the threat of apartments and commercial
and industrial uses from settling in the neighborhood.”
From a developer perspective, zoning was “founded on
the need to induce homeowners to invest their savings
in a large, undiversifed asset” that could not be insured
for equity losses (Fischel 2001:11).
These factors suggest that there is a long-standing,
deep-rooted interest in protecting the value of the
investments made by homeowners, and the existing
zoning framework was conceived to achieve this
objective. Consequently, eforts to promote smart
growth in existing communities are efectively seeking
to undermine what property owners have sought to
achieve through decades of zoning practice. This puts
pro-intensifcation policies at a signifcant disadvantage.
Urban intensifcation is also complicated. Unlike
greenfeld development projects, prospective infll
properties tend to vary, with diferent attributes,
development potential, obligations and requirements.
Properties may have environmental remediation
requirements that need to be addressed. Existing
community plans may not align with the development
potential of prospective properties. Design standards
may be more stringent to account for local form
and character concerns. Municipal planners may be
challenged to apply a consistent decision-making
framework for the approval of infll developments –
particularly those that are innovative or controversial.
CMHC (2005b, 2006) found environmental
remediation costs, fnancial and general economic
conditions, planning and regulatory approvals and
neighbourhood opposition were key barriers to
successful brownfeld intensifcation in Canada.
From a process perspective, urban intensifcation
projects tend to be more complex than new
developments are. They involve the co-ordination
of multiple municipal departments (planning,
engineering, transit, roads, parks and recreation),
22
land uses (commercial, recreational, single- and multi-
family residential), stakeholders (developers, residents,
community groups, social agencies, businesses,
municipal administrators) and plans and processes
(community planning, zoning applications, building
permits, community engagement).
These complexities generally lead to uncertainty in
the development process, extending timelines and
increasing costs. A number of studies have compared
the relationship between land regulation, construction
costs and housing afordability. Mayer and Sommerville
(2000) fnd that “metro areas with more extensive
regulation have up to 45 percent fewer [housing]
starts” and that while “development or impact fees have
relatively little impact on new construction … regulations
that lengthen the development process or otherwise
constrain new development have larger and more
signifcant efects.”
Saks (2005) found that “places with more regulation
experience a 17 percent smaller expansion of the housing
stock and almost double the increase in housing prices”
when hit by a demand shock. Glaeser and Gyourko
(2003:35) fnd that “measures of zoning strictness are
highly correlated with high prices” – fndings that were
later validated by Sommerville in a report commissioned
by CMHC (2005c:2).
These fndings suggest that the role of urban
intensifcation in achieving smart objectives tends to
be limited and, in fact, has the potential to result in
higher housing costs and to create overall afordability
challenges for the municipality. Perhaps the ideal
approach for incorporating urban intensifcation into
municipal smart growth planning policy is best phrased
by Farris (2001:2):
The primary goal of smart growth advocates
should be to encourage higher-density quality
development at the metropolitan edge and
exurbia while selectively choosing those
relatively limited infll opportunities.
3.1.2 SMART GROWTH IN NEW
COMMUNITIES
Municipalities are often encouraged to focus on
strengthening smart growth principles in new
communities. After all, policies that promote smart
growth in new communities will alleviate the need for
subsequent intensifcation of existing communities in
the long run. However, applying smart growth practices
to new communities represents a substantial shift in
consumer preferences and business practices that may
not be realistic.
In terms of where to live, increased mobility has made
quality of life one of the top priorities for people when
choosing their location, and it is often a higher priority
than commuting times or proximity to work. As Fischel
(2001:21) asserts, “[T]he local school’s test scores are
a larger determinant of home values than access to
jobs.” In a recent comparison of smart growth and
conventional communities in Canada, CMHC (2013)
found that while there was increased walking and
bike use within smart growth communities compared
with traditional suburban development, there was no
substantial diference in the use of public transit for
longer trips. The smart growth communities had 17 per
cent fewer jobs within a 5 km radius. These fndings
suggest that the smart growth objectives of work-home
23
collocation and greater transit use may be difcult to
achieve.
From an employment perspective, while job
suburbanization has been observed to some extent with
population disbursement, much of it is the result of the
increased accessibility of businesses to less-expensive
land due to increased transportation accessibility
(Fischel 2001:19). These types of jobs tend to be location
specifc (located in industrial and logistics parks) and
generally not in areas accommodative for residential
uses. However, there is evidence that some jobs (such
as restaurant, retail and professional services) do follow
population growth (Brueckner 2000:163, Cervero
2001:5), especially when coupled with investments in
transportation nodes that help encourage sub-centre
development (Cervero 2001:11). These jobs could
potentially enable work-home collocation objectives.
However, as Fischel (2001:20) notes, “In the multi-
nucleated metropolis, urban jobs are almost equally
far from any given suburb,” and unless transportation
accessibility becomes constrained, residents are unlikely
to prioritize work-home collocation in the communities
they choose.
In terms of transit use, more transportation accessibility
has increased the disbursement of people and
businesses across cities. In the absence of transportation
accessibility constraints, creating an economically viable
public transit system that meets the needs of residents
(with increasingly complex trips) in a manner more
efcient than the automobile is a signifcant challenge.
Another consumer-related challenge of smart growth
relates to the preferences of the population. CMHC
(2013) found that traditional developments attracted
an older cohort with more adults with children, which
is consistent with the City of Calgary’s occupancy rates
(2.91 persons per unit in new single-family homes
compared to 1.81 in multi-family units) (City of Calgary
2013a:63). In regions where there are location choices
and a lack of alignment of development policies across
neighbouring municipalities, smart growth policies
for new communities may drive these prospective
homeowners to the urban fringes or to neighbouring
municipalities in pursuit of the quality of life they desire.
This efect is exacerbated when considering afordability:
While the construction and development costs per unit
are lower for smart growth properties, the costs per
person and per square foot are higher. Thus, under smart
growth, not only will prospective homeowners be getting
a smaller home, they will be paying more for it per
square foot. These conditions have the potential to create
an unsustainable development pattern within the region
over the long run, with free-rider costs imposed on the
central municipality.
Finally, there is the need for developers and
administrators to adjust to new business practices
because of smart growth policies in new communities.
Smart growth represents a new business model for many
traditional suburban developers and requires signifcant
co-ordination, risk sharing and alignment on the part of
the municipality (Cervero 2001:12, Calgary Chamber of
Commerce 2008:49). If new developments have higher
densities, smaller roads, less parking and are dependent
upon public transit for mobility, then the supporting
infrastructure and services need to be in place near the
time that residents move in. This creates complications,
uncertainty and additional risk (over and above the
uncertainty over the demand for the new product) and
needs efective management to ensure the viability of
smart growth strategies.
24
PERHAPS THE BIGGEST CHALLENGE
TO INTENSIFICATION IS RESIDENT
OPPOSITION. DENSIFICATION HAS
THE POTENTIAL TO INCREASE
CONGESTION, REDUCE GREEN
SPACE, INCREASE STRESS ON
EXISTING INFRASTRUCTURE AND
CREATE MORE SOCIAL ISSUES IN
EXISTING COMMUNITIES.
25
3.2 ECONOMIC POLICY
Economic policy is the second tool available to
municipalities for managing growth-related costs and is
often used in concert with regulation. From an economic
perspective, excessive or unsustainable growth is largely
the result of three market failures: failure to ensure new
development pays for the infrastructure costs of growth,
failure to account for the social costs of congestion
and failure to account for the benefts of open space
(Brueckner 2000). Well-designed economic policies and
approaches can address these challenges.
3.2.1 PAYING FOR THE COSTS OF
DEVELOPMENT
Failure to account for the true infrastructure costs
of growth is perhaps the most signifcant and direct
challenge for efectively managing growth and
development. As discussed, these costs are best
accounted for as part of the construction, operation and
life cycle costs of the residential unit. The most common
tool available to municipalities to help account for
these costs is development cost levies or of-site levies.
Developers pay these levies to compensate municipalities
for the initial infrastructure costs of new development –
in both greenfeld and infll situations.
The concept of the development levy approach is founded
upon the benefts-received principle, which seeks to
ensure that those who beneft from the incremental
infrastructure and services also pay the costs. This is
widely applied by municipalities across Canada when
it comes to development charges for new communities
(CMHC 2010:6).
One of the problems with the development levy
approach in Canada, however, is that fees tend to be
standardized per unit of development and class of
property (residential, commercial, industrial) regardless
of the location of the development within the community
(Kitchen 2006:28). While this is an administratively
efcient approach, it is essentially average-cost pricing
for development, which subsidizes relatively more-
expensive developments at the expense of less-expensive
ones.
A more efcient approach would be to charge
development fees based on the actual marginal costs of
the new infrastructure that is required in the community
as opposed to average costs (Kitchen 2006:28, Slack
2006:16, Brueckner 2000:166). To account for diferent
unit sizes and densities within communities, levies
should be apportioned within developments based on
marginal infrastructure costs per unit.
While the development cost levies are useful from a
benefts perspective, they are able to capture only a
narrow component of the overall costs of growth and
development. As discussed, the ongoing operating,
maintenance and life cycle costs of infrastructure must
also be considered.
The failure to appropriately account for and price life
cycle infrastructure costs has led to the infrastructure
defcits confronting municipalities (Vander Ploeg and
Brunnen 2003:28). These types of costs need to be
invested on an ongoing basis to maintain and/or extend
the useful life of municipal infrastructure assets. When
maintenance is deferred, the useful life of the asset is
shortened and rehabilitation and replacement costs
arrive sooner.
26
The general operating and capital budgets of
municipalities usually fund life cycle infrastructure
costs; however, this approach is detrimental from
a benefts perspective, as existing residents end up
subsidizing new growth, and there are no price signals
for understanding how much infrastructure to provide.
In addition, an inability to fully acknowledge and
account for these costs in the price of the residential
unit sends distorted signals to both the market and
the decision-makers. A more efcient social-welfare
maximizing approach would be to charge these costs
to the benefting area and/or units as opposed to
regulating built form densities and absorbing these costs
through the general tax base.
The best way to price operating and life cycle costs is not
through development levies (because the benefciaries
are long-term residents, not initial homebuyers) but
rather through tax tools such as a special tax by-law,
diferential residential tax rates at a community level
or a local improvement levy (which are all available to
Alberta municipalities).
3.2.2 PAYING FOR THE COSTS OF
TRANSPORTATION
The second market failure of urban growth is the
failure to account for the true costs of transportation.
Transportation accessibility is widely cited as a
key contributing factor in the suburbanization and
expansion of cities (Fischel 2001, Brueckner 2000,
Litman 2013). As Cervero (2001:4) posits:
Transportation investments induce growth for one,
and only one, reason: they improve accessibility.
It is accessibility – the opportunity to reach places
efciently – that attracts new growth.
A market failure arises when the costs of the
investments and the use of transportation infrastructure
(construction, congestion, environmental impacts) are
not paid for by the benefciaries.
3.2.2.1 ROADS
Growth requires investment in both local community
roads and arterial road networks. For local community
road infrastructure, all of the benefts tend to accrue to
the local homeowner, and a development cost charge for
the initial investment is an equitable approach (City of
Calgary 2005:39).
For arterial roads, the benefts can be divided into the
option to use the road and the actual use of the road.
The option to use component is linked to the property,
and the initial costs (both the extensions and updates to
the existing system) can be fnanced equitably through
of-site development levies (City of Calgary 2005:40).
For the actual use and operating costs of the road,
the ideal pricing tool is a user-based road toll (City of
Calgary 2005:39, Kitchen 2006:76, Slack 2006:11). This
is the most efcient way to ensure that benefciaries
(motorists) pay for the costs of the infrastructure they
use. The key here is to ensure that the price is based on
the actual costs of maintaining the roads, including life
cycle costs, along with a pollution component for vehicle
use (City of Calgary 2005:39). To account for congestion
costs, diferential pricing could be applied during peak
periods. Many jurisdictions in Canada, the United
States and overseas have experienced success with these
electronic tolling technologies (Kitchen and Lindsey
2013:48).
27
In the absence of a road toll and similar to the approach
discussed above, a second-best approach is to estimate
the operating, maintenance and life cycle infrastructure
costs of the road network and then apportion
appropriate costs to the benefting communities. This
can be done through diferential property taxes such
as local improvement levies, diferential residential tax
rates or a special tax option similar to the way initial
capital costs are paid through developer levies.
3.2.2.2 TRANSIT
Transit infrastructure is like that of roads. There is
an option for use beneft that is tied to the property
(especially for rail-based transit) as well as a user
component. The option for use component is a localized
one, with strong benefts linked to the properties in the
immediate vicinity of the investment (Cervero 2001:5,
Doherty 2005, Smith, Gihring and Litman 2009, Junge
and Levinson 2012). This suggests that under a benefts-
based approach, the initial infrastructure costs should
be funded through levies on local benefting properties.
A number of studies have advocated for land-value
capture approaches for fnancing transit, which would
provide an incentive for more densifed development in
proximity to transit infrastructure (Smith, Gihring and
Litman 2009, Junge and Levinson 2012).
From a use perspective, the most-direct benefciaries
of transit are the users and, correspondingly, user fees
should represent a signifcant component of the costs
(City of Calgary 2005:39, Kitchen and Lindsey 2012).
Fares should also be based on distance travelled and
time of use, as fat fares encourage urban sprawl and
discourage transit use for short trips (Kitchen and
Lindsey 2012:6). Zone and peak-time pricing could
efectively accomplish these objectives.
Some suggest there are also external benefts to public
transit such as a reduction in pollution and congestion
costs, leading to lower infrastructure costs for road
investments (City of Calgary 2005:40). Where road toll
prices are in place, these externalities are accounted for.
However, in the absence of tolls, some subsidization is
justifed, particularly if funded via a roads-based charge
such as a gasoline tax (City of Calgary 2005:41). To the
extent that transit provides a social beneft through
universal access for lower income individuals, an
income-based approach is the most efective method for
achieving this objective.
3.2.3 PAYING FOR THE COSTS OF
OPEN SPACE
The fnal market failure is the failure to account for
the social value of open space. This failure arises
when the community loses access to open space that
has been valued for leisure by existing residents.
Generally, when cities grow spatially, developers often
purchase agricultural land. While some argue that
urban development devours scare agricultural land, it is
important to bear in mind that this transaction involves
a willing buyer and seller, whereby the value of the land
is worth more in urban use. Where the productive value
of the agricultural land is high, urban development is
less spatially consuming (Brueckner 2000:164).
Accounting for the public value of open space, however,
is a subjective exercise involving substantial discretion.
Options available to municipalities include establishing
green space requirements in new development as well as
earmarking sensitive areas for environmental protection
and recreation use such as in the case of Stanley Park in
Vancouver or Fish Creek Park in Calgary.
28
3.3 SUMMARY
Managing growth-related costs is a complex task.
While land-use policies can play an important role in
directing development, the limitations of this tool must
be recognized. Policies that encourage smart growth
design and densifcation are not likely to be met with
substantial success on their own. These approaches,
while well intended, generally involve high-level
estimations and speculation in terms of overall targets
and market demand and do not address the underlying
economic dynamics of individual and business location
and mobility decisions and the corresponding market
failures at play.
While it is important for existing communities
to prioritize intensifcation, the primary focus of
planning policy cannot be to manage growth-related
costs, as there are too many inertial factors at play.
Highly regulated environments compromise housing
afordability. For new communities, planning policies
that seek to achieve smart growth objectives have the
potential to be more efective, but they need to be
developed in concert with efective fnancial tools.
The key is to focus on full-cost pricing for new
infrastructure and ongoing operational and life
cycle costs and assign these costs to the appropriate
benefting areas (in new and existing communities). This
approach would lead to the lowest overall construction,
infrastructure and life cycle costs for accommodating
population growth. It ensures that the benefciary pays
the costs and that the tax base does not absorb them.
Because single-family housing ofers the lowest
total cost per occupant, planning policies that seek
to encourage high-density development as a means
of reducing municipal infrastructure cost focus on
a very narrow component of the costs of growth,
and this actually leads to higher total housing costs
through the oversupply of high-cost, high-density,
low-occupancy units. These cost increases are in excess
of the infrastructure and life cycle cost savings that
would accrue to government in the absence of such
policies (costs already funded through the tax base).
Consequently, this type of policy approach ultimately
decreases the total economic welfare of the citizens of
Calgary.
Transportation pricing is perhaps the most important
factor in managing growth-related costs. As Cervero
(2001:3) notes, “[R]ising motorization is rooted in
many factors beyond sprawl,” and much of the demand
is linked to rising incomes and access to motorized
vehicles (Brueckner 2000:169, Cervero 2001:3). Some
studies found that smart growth actually leads to
increased trafc congestion (Litman 2013:8, Cox 2000,
Ewing and Cervero 2010). Consequently, addressing
the challenges that arise with increased transportation
mobility requires more than smart growth or anti-
sprawl-related policies. It requires pricing. Perhaps
Kitchen and Lindsey (2013:8) put it best: “Without
efcient pricing of public transit and roads, users will
not make appropriate decisions about how often to use
it, where to live and work, and so on.”
29
4. HOW DOES CALGARY
COMPARE AND WHAT
ARE THE PRIORITIES FOR
CHANGE?
The City of Calgary is a very active municipality in
terms of its approach to managing the costs of growth.
Fiscal sustainability is an increasing concern in the
municipality, which has experienced substantial growth
in recent years. In response, the City developed a new
approach to growth management that prioritizes smart
growth patterns of development in new and existing
communities. The City also recently increased its growth-
related development levies.
This section reviews the City of Calgary’s planning and
economic policies for managing growth-related costs in
the context of the above reviewed literature and ofers
recommendations for strengthening the City’s approach.
The Overton Window approach is the basis for these
recommendations.
4.1 CALGARY PLANNING POLICIES
FOR MANAGING GROWTH-RELATED
COSTS
In 2009, the City of Calgary adopted a new MDP to guide
growth and development (City of Calgary 2009). This
plan sought to encourage a more smart growth-oriented
form of urban development, with a focus on high-density,
mixed-use, transit-oriented development in new and
existing communities. This plan is based on a long-term
vision wherein the city will accommodate a 33 per cent
population growth over the next 30 years in developed
areas as well as 50 a per cent growth in developed areas
over the next 60 to 70 years (City of Calgary 2013b:51).
The intent is to increase densities in existing and
new communities and to intensify around strategic
nodes and corridors to ensure efcient use of land
and infrastructure. As part of this plan, the City has
developed a strategic framework for growth and change
that seeks to prioritize and sequence infrastructure
investments in new and existing communities based on a
combination of factors in order to achieve smart growth
objectives (City of Calgary 2009
art 5).The City should be commended for its well-intentioned
and comprehensive approach to managing growth and
development. This ambitious project is sure to provide
helpful direction in guiding municipal growth and
development over the long term. The challenge with
the City’s approach, however, is the complexity of the
task before it. A number of intricate factors, many of
which will be situation specifc and guided by economic
and behavioural fundamentals, drive growth and
development decisions.
4.1.1 GROWTH IN EXISTING
COMMUNITIES
Perhaps the biggest issue confronting the City’s
overall growth management approach is the focus on
intensifcation as a major source of future development
– 50 per cent of population growth over the next 60 to
70 years. For context, “Calgary has grown by 243,706
people since 2002, while the new suburbs have added
246,687 people” (City of Calgary 2013a:58). This is a
net loss of approximately 3,000 residents from existing
communities to the suburbs over this 10-year period.
As a short-term goal, the City expects to accommodate
an additional 28,000 people in existing communities by
2019 (City of Calgary 2013:a:54). This is a net increase of
approximately 31,000 or 2,400 residents annually.
30
Recall that the use of planning policies to achieve
intensifcation of existing communities is a limited
tool that must overcome substantial inertial efects
and has the potential to result in higher housing costs,
create overall afordability challenges for the City and/
or drive growth to the fringes of the region. In the
absence of a focused approach, including streamlined
planning processes, permitted use zoning and
ongoing commitment and resources on the part of the
municipality (usually in partnership with the private
sector), these targets will be very difcult to achieve.
Moreover, alignment of existing community plans with
the overarching MDP is generally needed for enlisting
community support for achieving densifcation targets in
existing communities. However, many of the community
plans have not been updated since the adoption of
the MDP and, as a result, there is uncertainty and
the potential for unnecessary delays in the evaluation
of development applications that seek to achieve
intensifcation targets.
A more prudent and gradual planning approach
to managing growth city wide would be for a more
balanced approach to population growth in new and
existing communities, in concert with reforming the
planning and regulatory process to remove barriers to
development and identify select existing communities for
prioritization under the growth management framework.
This prioritization needs to be informed by the true costs
associated with various built forms, based on actual
occupancy counts per unit.
4.1.2 PRIORITIZING AND
SEQUENCING COMMUNITY
DEVELOPMENT
Calgary City Council is in the process of fnalizing criteria
and performance metrics for the prioritization and
sequencing infrastructure investment and development
patterns as part of its strategic framework for growth and
change. These criteria include the capacity of existing
infrastructure, the community services in place, city-
funded costs, access to transit, land supply, readiness
to proceed (landowner and community support),
contiguous growth, innovation and employment
opportunities (City of Calgary 2012).
While the framework is thorough, some of these criteria
(such as innovation) present signifcant discretion
in their interpretation, which creates uncertainty for
prospective developers in terms of bringing forward
applications for development. Other criteria, such as
access to transit and employment opportunities, have
the potential to substantially narrow the market for
new development to areas where land is already more
expensive and would cater to a particular subset of the
population.
The access to employment criterion seems particularly
limiting, as collocation of residence and place of
employment is very difcult to achieve in a dispersed
metropolitan area with diferent sectors. Employment
decisions are not necessarily up to the discretion of
the employee and accounting for quality in job type
is a subjective process. Areas with the greatest job to
population densities in the city include the downtown,
the east and the northeast (City of Calgary 2013a:84).
31
The downtown is already well developed and well
serviced by transit and other transportation modes,
while the east and the northeast have strong industrial
components and employment centres that are dispersed
and isolated from residential areas. Employment
proximity is also not necessarily a desired attribute
sought by homebuyers, given the accessibility of
transportation options within the city, combined with
a preference of quality of life in residential location
decisions. Lower job to resident ratios in other quadrants
of the city, such as the north central and west areas,
demonstrate this.
Rather, the City is encouraged to focus on access to
existing transportation infrastructure, nodes and
corridors, which are already incorporated in the criteria
under “community services in place.” This approach will
ensure that residents are able to transport themselves
to employment locations efciently, and these are
areas where future employment opportunities will
tend to develop in response to population growth
(Cervero 2001:5). However, to make this approach truly
successful, Cervero (2001:12) asserts:
A number of pre conditions must usually exist if
new transport facilities are to exert meaningful
land use impacts. Foremost among these
are: permissive and incentive zoning, … the
availability of nearby vacant or easy to assemble
and developable parcels; support for land-use
changes among local residents; a hospitable
physical setting; complementary public
improvements; … and an absence of physical
constraints.
While the strategic framework for growth and change
seeks to address many of these factors, it is unlikely
that all of these factors will be in place at once for the
majority of development opportunities in the city. This
approach also requires substantial focus, involvement
and resourcing by the municipality, which needs to
be consistently committed in order for the strategic
framework to be successful. In reviewing the City’s
experience in building smart growth communities, the
two most prominent and ground-breaking examples,
McKenzie Towne and Garrison Woods, required strong
partnership and co-ordination between the City and the
developers:
Both the developer and the City incurred
signifcant risk in the process, the developer
provided a product that was unconventional
for the market, and the City undertook
eforts to create alternative engineering and
design standards to ensure the success of the
development. Design standards for Garrison
Woods took 14 months, and a similar approach
for the McKenzie Towne project took 12 months
(Calgary Chamber of Commerce 2008:49).
In addition to these complexities, perhaps the biggest
challenge with the City’s approach is the creation of
a new strategic framework for growth and change in
addition to setting ambitious intensifcation targets for
existing communities relative to historical standards.
Absent major zoning and regulatory reforms to facilitate
redevelopment, this will likely have a cascading efect in
terms of constraining development in the city.
Consequently, the City should proceed with caution
in implementing the framework to ensure it is able to
commit the necessary focus, resources and investments
32
to complement the private investment and make sure
that the projects are successful. Lessons learned and
continuous improvement could then be applied to future
projects. Running scenario analyses on the afordability
and diversity of housing form in prioritized developments
would also be prudent to ensure that the municipality
is not inadvertently selecting more-expensive and
homogeneous developments through the framework.
4.1.3 PLANNING POLICY
RECOMMENDATIONS
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Revisit the City’s short- to medium-term
intensifcation targets for existing communities in
the MDP, with a rebalance of population growth in
new and existing communities, informed by the total
construction, land and infrastructure costs associated
with various built forms and occupancy counts per
unit. This will enable a more gradual approach to
development within the city, minimize potential
spillover efects, enhance total economic housing
benefts for Calgarians and avoid unnecessarily
eroding housing afordability through excessive
regulatory and time constraints;
2. Streamline regulatory and zoning processes for
developments in existing communities, with a focus
on permitting higher density development in low-
density neighbourhoods;
3. Invest signifcant staf time and resources in
implementing the strategic framework for growth
and change, as the literature and experience in
Calgary have demonstrated a need for partnership
with industry and joint commitment in ensuring such
projects are a success;
4. Introduce an afordability and diversity of
housing form sensitivity metric into the strategic
framework for growth and change, informed by total
construction, land and infrastructure costs per person
to ensure the framework is not inadvertently selecting
more-expensive, homogeneous developments or
distorting the market.
This modifed planning policy approach would help
garner greater public support for development initiatives
in existing communities, provide the City with greater
fexibility to adjust its policies as needed, provide
time for community groups and associations to align
their community plans with the MDP and enable the
development community to innovate and adjust their
business models accordingly.
33
PLANNING POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Introduce an afordability
and diversity of housing
form sensitivity metric into
the strategic framework
for growth and change,
informed by total
construction, land and
infrastructure costs per unit
Not included in the
framework
Need to ensure the
framework is responsive to
market demand and ofers a
diversity of housing choices
and price points based on
the actual costs of growth
and development in order to
maximize economic welfare
Sensitivity metrics help policy-
makers monitor the impact
of their decisions and make
adjustments over time.
Invest signifcant staf
time and resources in the
initial implementation of
the strategic framework for
growth and change
Not currently
contemplated
Both the literature and
experience in Calgary have
demonstrated a need for
partnership with industry
and joint commitment in
ensuring such projects are a
success
Investing substantial focus and
resources to implement the
strategic framework for growth
and change enables continuous
learning and adjustments to
ensure projects are a success
without adversely afecting
stakeholders. The lessons
learned can be applied to future
projects.
Revisit the City’s short- to
medium-term development
targets for existing
communities in the MDP,
with a more gradual
approach toward the
intensifcation of existing
communities, informed by
the total construction, land
and infrastructure costs
Target is to
accommodate a 33
per cent population
growth in developed
areas over the next 30
years
Targeting development
in existing communities
is a difcult approach to
managing growth. Complex
regulation, the need for
community support,
difculties securing fnancing
and challenges in terms of
assembling land parcels are
all at play.
A more gradual approach to
development within the city
helps ensure that citizens,
businesses and the public
sector have time to adjust
their business practices and
lifestyle choices. This approach
will also minimize spillover
efects, enhance total economic
housing benefts for Calgarians
and avoid unnecessarily
eroding housing afordability
through regulatory and time
constraints.
Streamline regulatory
and zoning processes for
developments in existing
communities, with a focus
on permitting higher
density development in low-
density neighbourhoods
City undertaking
Transforming
Planning initiative to
strengthen internal
approval processes.
Zoning reforms in
existing communities
are not currently
anticipated.
Complex regulation and
zoning policies are key
barriers to achieving
development targets in
existing communities.
Streamlining regulatory
and zoning processes helps
remove barriers to achieving
development targets in existing
communities.
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4.2 CALGARY ECONOMIC POLICIES
FOR MANAGING GROWTH-RELATED
COSTS
In recent years, the City found that the current approach
to fnancing growth did not result in sufcient revenue to
recover costs. According to the City of Calgary (2010:4):
Suburban growth at traditional densities
in the range of four units per acre has been
acknowledged as not completely paying for itself.
The overall benefts realized by The City for this
type of low density suburban development do
not outweigh the initial and ongoing operational
costs to The City.
Consequently, the City was challenged to reconcile this
funding gap through changes to planning and growth-
fnancing policies. The 2011 to 2015 development
levy agreement negotiated between the City and the
Urban Development Institute introduced a water and
sanitary sewer levy for the frst time since 1999, along
with new levies for bus and pedestrian infrastructure
(City of Calgary 2011b). Levies, fees and charges for
new development in Calgary now include local roads,
arterial roads, storm sewers, trafc signs, fre, EMS and
police stations, recreation and library facilities, large
buses, administration/inspection costs and water and
wastewater facilities.
Increasingly, the City has been seeking to enhance
the responsiveness of development agreements to the
actual costs of servicing new communities and has, for
example, created diferential rates for storm sewers
depending on the watershed area of the community.
However, all other levies are set on a city-wide basis (City
of Calgary 2013b:11). As discussed, this average-cost
pricing approach is inefcient and distorts the market
for new development by subsidizing more-expensive
developments at the expense of more-afordable ones.
A marginal cost-price approach (for new and existing
community development) would send better market
signals to prospective homebuyers in terms of how the
cost of growth relates to the infrastructure and services
that they consume.
While the City’s development levy approach is benefcial
in terms of ensuring that new development pays for the
infrastructure costs of development, “the City’s funding
problem in recent years was partly … driven by the
spread out growth pattern in Calgary and the way the
municipality uses funding and fnancing tools available
to it” (City of Calgary 2013b:1). In particular, the City
continues to be challenged in terms of its approach to
assigning the maintenance and life cycle infrastructure
costs of growth to the benefciaries. According to the City
of Calgary (2013b:5):
While the largest components of the cost
attributable to growth are the initial capital
costs, new capital necessitates ongoing operating
costs and eventual replacement costs. … On an
annual basis, lifecycle maintenance consistently
costs more than operating costs in roads and
utilities. By comparison, annual operating costs
are higher than lifecycle maintenance costs in
transit. Transit operating costs tend to increase
with the number of hours of operation each year,
which is determined by growth in the population
as well as the geographic expansion of the
city. As a result, when making growth related
infrastructure investment decisions, The City of
Calgary has to consider ongoing cost obligations
required for new infrastructure.
35
As discussed, the operating maintenance and life cycle
infrastructure costs associated with new development
are best paid for by the benefciaries. Specifcally, these
costs (along with initial infrastructure costs) need to
be accounted for in the costs of construction of various
housing unit built forms and assigned to the benefting
household or community.
For road-related infrastructure, in the absence of a road
tolling authority, a second-best approach is to assign
these costs to the benefting area through a special tax
levy, a local improvement levy or a diferential residential
tax rate for the area in proportions similar to the original
capital levies. For water and wastewater utility services,
incorporating depreciation and/or infrastructure
replacement costs into the user fees will help ensure the
long-term fnancial viability of the system in proportion
to the costs of consumption.
For transit infrastructure, current fee structures are not
responsive to costs of service or demand for use; rather,
they are based on average pricing even the costs increase
with distance (City of Calgary 2013:14). A more efcient
approach would be to introduce diferential pricing
based on trip length, zones and peak periods. In terms
of infrastructure, a very distinct property benefciary
pattern is associated with rail infrastructure, and the
infrastructure replacements costs of all transit should
be assigned to the benefting area in a manner similar to
other growth-related infrastructure.
Adopting these approaches will enable Calgarians to
make informed choices about the costs of the various
built forms they choose, balanced against the benefts,
and lead to the most-efcient and cost-efective outcome
for total infrastructure costs – ultimately maximizing
the total welfare of Calgary citizens and reducing or
eliminating City-funded growth costs. This pricing
approach reduces the need for planning regulation in
managing growth-related costs, as it is ultimately more
efective at managing growth and maximizing social
welfare.
One consideration is the political acceptability of
shifting costs traditionally funded through city-wide tax
obligations to benefting communities. By supporting the
MDP with ambitious densifcation targets, Calgarians
have already expressed an interest in moving toward
an efcient built form. Transitioning toward a more
user-pay fnancing system (provided overall taxes do
not increase, all things being equal) will help them
achieve this goal. A phase-in approach to shifting the
tax burden will help homeowners to gradually absorb
the incremental increase and adjust their home, work
and commuting decisions accordingly. Council adopted
a similar approach in its decision to consolidate the
business tax and the non-residential property tax in 2011.
36
THIS PRICING APPROACH REDUCES
THE NEED FOR PLANNING
REGULATION IN MANAGING
GROWTH-RELATED COSTS, AS IT
IS ULTIMATELY MORE EFFECTIVE
AT MANAGING GROWTH AND
MAXIMIZING SOCIAL WELFARE.
37
4.2.1 ECONOMIC POLICY
RECOMMENDATIONS
CALGARY CITY COUNCIL AND
MUNICIPAL DECISION-MAKERS
SHOULD FOLLOW THESE
RECOMMENDATIONS:
1. Adopt a marginal cost approach to development levies
(as opposed to an average-cost approach) to ensure
new development in each community pays the actual
infrastructure costs incurred. This should apply
to new and existing communities. This approach
can be achieved through, for example, the use of
catchment boundaries for water, sanitary, storm
and transportation infrastructure (City of Calgary
2013:15). The City should seek to target this change in
time for the 2015 development levy negotiation with
the industry;
2. Calculate maintenance, operating and life cycle
infrastructure costs associated with new growth
(roads, recreation, police, fre, EMS) and assign these
costs to benefting residential units or communities
(through various tools such as a special tax, a local
improvement levy or diferential residential tax rates)
using a marginal cost approach. This approach should
also apply to utility fees. Accounting for the true cost
of development enables Calgarians to make housing
and occupancy choices that minimize their costs and
reduce or eliminate the tax-supported infrastructure
costs that would accrue to the City;
3. Reduce the use of planning policies to regulate
density in favour of the total construction, land and
infrastructure cost approach to managing growth.
This will lead to a more efcient, market-based
approach to growth management and will better
enable Calgarians to make informed housing choice
and occupancy decisions based on total costs, and it
will reduce overall costs to the City;
4. Adopt diferent prices for transit use based on
distance travelled, zones and peak use as opposed to
the current fat-fee structure. This approach will help
ensure that consumers pay based on the marginal cost
of providing the service, and it will reduce incentives
for overuse; and
5. Phase in any tax burden shifts over fve to 10 years
to ensure Calgarians have time to adjust their work,
home and commuting decisions accordingly.
38
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ECONOMIC POLICY RECOMMENDATIONS
POLICY CURRENT STATUS DESCRIPTION BENEFIT
Adopt a marginal cost
approach to development
levies in existing and new
communities
City negotiates
development levies
based on average cost
Marginal cost pricing is
efcient. Better directs
growth based on cost
Ensures new development in
each community pays the actual
infrastructure costs incurred
(as opposed to more-expensive
developments being subsidized
by lower cost developments)
Calculate and assign
infrastructure operating
and life cycle costs
to communities and
households
Funded out of the
general tax base
Primary principle is that
benefciaries of a service pay
the cost. Avoids structural
infrastructure defcits
Helps citizens make more-
informed decisions about
housing costs and choice based
on the true cost of growth.
Reduces or eliminates tax-
supported infrastructure costs
associated with growth
Phase in any tax burden
shifts over fve to 10 years
N/A Ensures stability for
citizens and the City in
terms of understanding tax
obligations and revenue
expectations
Ensures Calgarians have time
to adjust their work, home and
commuting decisions in the
event their costs increase
Adopt diferent prices
for transit use based on
distance travelled, zones
and peak use
Applies a current fat-
fee structure
Primary principle is that
benefciaries of a service
pay the cost. Avoids over-
consumption and use
Diferential pricing helps
ensure consumers pay based on
the marginal cost of providing
the service and reduces
incentives for overuse.
Reduce the use of planning
policies to regulate
density in favour of the
total construction, land
and infrastructure cost
approach
Uses planning policy
to regulate density
in order to reduce
growth costs
Municipal planning policies
that mandate higher
densities unnecessarily
increase housing costs and
reduce the total economic
welfare of Calgarians
Accounting for the true cost
of development enables
Calgarians to make housing
and occupancy choices that
minimize their own costs and
reduce or eliminate the tax-
supported infrastructure costs
that would accrue to the City.
39
1. The Overton Window is a public policy communication device used to show a range of policy options and their current po-
litical acceptability. It allows research institutes to express a wide range of ideas while being respectful of political reality.
The spectrum displays policy ideas with increasing reform ambition while the ‘“window” shows positions that are currently
used or contemplated.
2. The CMHC approach is more reliable, as it is based on direct cost comparisons by built form type. The Plan It Calgary ap-
proach is based on costs of dispersed versus more-compact development in Calgary. This paper assumes that the dispersed
infrastructure costs are associated with single-family development, while the compact form of development is associated
with condo and townhome development.
NOTES
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2. Avison and Young. Calgary Investment Review. 2011. First Quarter.
3. Brueckner, J.K. “Urban Sprawl: Diagnosis and Remedies.” International Regional Science Review 23, 2: 160-171. 2000.
April.
4. Calgary Chamber of Commerce. Municipal Land Development Policies and Regulations and the Impact on Calgary Hous-
ing Afordability. Calgary Chamber of Commerce. 2008. May.
5. Canada Mortgage and Housing Corporation. Comparing Canadian New Urbanist and Conventional Suburban Neighbour-
hoods (Updated). Socio-economic Series 13-002. 2013. February.
6. Canada Mortgage and Housing Corporation. Government-imposed Charges on New Housing in Canada (2009). Socio-
economic Series 10-022. 2010. November.
7. Canada Mortgage and Housing Corporation. Life Cycle Costing Tool for Community Infrastructure Planning. Socio-eco-
nomic Series 08-001. 2008. May.
8. Canada Mortgage and Housing Corporation. Brownfeld Redevelopment for Housing: Case Studies. Socio-economic Series
06-015. 2006. August.
9. Canada Mortgage and Housing Corporation. Smart Growth in Canada: A Report Card. Socio-economic Series 05-036.
2005a. December.
10. Canada Mortgage and Housing Corporation. The Impact of Zoning and Building Restrictions on Housing Afordability.
Socio-economic Series 05-012. 2005c. April.
11. Canada Mortgage and Housing Corporation. Brownfeld Redevelopment for Housing: Literature Review and Analysis.
Socio-economic Series 05-013. 2005b. April.
12. Canada Mortgage and Housing Corporation. Infrastructure Costs Associated with Conventional and Alternative Develop-
ment Patterns. Socio-economic Series Issue 26. 1995.
13. Canadian Homebuilders’ Association. The CHBA Poll Pulse Survey. 2013. Winter.
14. Ewing, R. and R. Cervero. “Travel and the Built Environment: A Synthesis.” Transportation Research Record, 1780: 87-
114. 2010.
15. Cervero, R. Integration of Urban Transport and Urban Planning. The World Bank Institute, Washington, D.C., 407-427.
2001.
16. City of Calgary. Calgary Snapshots 2013. Land Use Planning & Policy Planning, Development & Assessment. 2013a. June.
17. City of Calgary. Evaluation of Funding and Financing Tools and Mechanisms for Growth. Land Use Planning & Policy
Planning, Development & Assessment. 2013b. April. Available at http://www.calgary.ca/PDA/DBA/Pages/Corporate-
Framework-for-Growth-and-Change.aspx?redirect=/growthmanagement. Accessed August 27, 2013.
18. City of Calgary. Calgary Snapshots 2012. Land Use Planning & Policy Planning, Development & Assessment. 2013. March.
19. City of Calgary. Corporate Framework for Growth and Change. Planning & Policy Planning, Development & Assessment.
2012. May. Available at http://www.calgary.ca/PDA/DBA/Pages/Corporate-Framework-for-Growth-and-Change.
aspx?redirect=/growthmanagement. Accessed August 28, 2013.
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40
20. City of Calgary. Methodology for Calculating Charges for Redeveloping Communities. Land Use Planning & Policy
Planning, Development & Assessment. 2011a. August.
21. City of Calgary. Summary of UDI/City Negotiated Agreement. 2011b. April.
22. City of Calgary. Financing Municipal Infrastructure: Sharing the Capital Costs and Financial Risk of Residential
Growth in Calgary. 2010.
23. City of Calgary. The Implications of Alternative Growth Patterns on Infrastructure Costs. IBI Group. 2009. April.
24. City of Calgary. Financing Growth Study: Sustainable Growth, Equitable Financing. Development and Building Ap-
provals. 2005. January.
25. Cox, W. How Urban Density Intensifes Trafc Congestion and Air Pollution. Wendell Cox Consultancy. 2000.
26. Doherty, M. Funding Public Transport Development through Land Value Capture Programs. 2004.
27. Farris, T. “The Barriers to Using Urban Infll Development to achieve Smart Growth.” Fannie Mae Foundation. Hous-
ing Policy Debate, Vol. 12, Issue 1. 2001.
28. Fischel, W. A. An Economic History of Zoning and a Cure for Its Exclusionary Efects. Department of Economics. Dart-
mouth College, Hanover, NH 03755. 2001. December.
29. Glaeser, E.L. and J. Gyourko. “The Impact of Building Restrictions on Housing Afordability.” Federal Reserve Bank of
New York Economic Policy Review. 2003. June.
30. Junge, J.R. and D. Levinson. “Financing Transportation with Land Value Taxes: Efects on Development Intensity.”
Journal of Transport and Land Use. Vol. 5 No. 1.1 pp. 49-63. 2012. Spring.
31. Kitchen, H. and R. Lindsey. Financing Roads and Public Transit in the Greater Toronto and Hamilton Area. Residential
and Civil Construction Alliance of Ontario. 2013. January.
32. Kitchen, H. Municipal Infrastructure Financing: A Prescription for the Future. Trent University. 2006. February.
33. Litman, T. Smart Growth Savings: What We know about Public Infrastructure and Service Cost Savings, and How
They are Misrepresented by Critics. Victoria Transport Policy Institute. 2013. April.
34. Mayer, C. and C.T. Somerville. Land Use Regulation and New Construction. 2000. March.
35. McConnell, V. and K. Wiley. Infll Development: Perspectives and Evidence from Economics and Planning. Resources
for the Future. 2010.
36. Saks, R.E. Job Creation and Housing Construction: Constraints on Metropolitan Area Employment Growth. Federal
Reserve Board, Finance and Economics Discussion Series. 2005.
37. Skaburskis, A. and R. Tomalty. “The Efects of Property Taxes and Development Cost Charges on Urban Development:
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ence. 303-325. 2000.
38. Slack, E. The Impact of Municipal Finance and Governance on Urban Sprawl. Institute on Municipal Finance and Gov-
ernance, Munk Centre for International Studies, University of Toronto. 2006. September.
39. Smith, J.J. and T.A. Gihring, with T. Litman. Financing Transit Systems through Value Capture: An Annotated Bibliog-
raphy. Victoria Transport Policy Institute. 2012. December.
40. Song, Y. and G.-J. Knaap. “Measuring the Efects of Mixed Land Uses on Housing Values.” Regional Science and Urban
Economics. 34. 663–-680. 2004. May.
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42. Vander Ploeg, C. New Tools for New Times: A Sourcebook for the Financing, Funding and Delivery of Urban Infra-
structure. Canada West Foundation. 2006. September.
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dation. 2003. October.
41
ABOUT THE AUTHOR
BEN BRUNNEN, BA, MPA, is an independent policy,
economic and advocacy consultant. Brunnen is formerly the Director of Policy and
Government Afairs and Chief Economist with the Calgary Chamber of Commerce, and he has
over 10 years of experience in the areas of applied economics, public policy and government
relations. Brunnen has worked for the British Columbia Ministry of Municipal Afairs and the
Canada West Foundation. He has published and consulted in the areas of municipal fnance,
economic development, energy policy, economic forecasting, and skills and labour shortages.
42
MUNICIPAL PAPERS SERIES
The Manning Foundation is building intellectual capital for municipal governance in fve streams of public policy
enquiry. Each stream will include a series of public policy papers designed to stimulate new thought about the role
of municipal government in society. Manning Foundation research papers are placed in the public domain via the
Foundation’s website and are available for review, debate, criticism and support by Canadians regardless of their
political afliation.
1. ORGANIC CITIES
An enquiry into how cities grow and what role government should play in regulating growth and providing
infrastructure, with the goals of economic efciency and liveability. Much of the debate around municipal
development is based around what urban forms are desirable, with sprawlers and smart growthers alike arguing that
land-use regulation and infrastructure provision should favour their ‘optimal’ urban form.
The Organic Cities project takes a diferent perspective: that what is important is not the urban form that emerges,
but the processes that are in place, particularly the role of government. On this view, it is more important that the
market is left free to serve consumer demand, with the important constraints being property rights and the real costs
of infrastructure provision rather than land-use regulations.
Upcoming papers include enquiries into the proper pricing of muncipal services generally and a more specifc report
on the politics of implementing real time road pricing.
2. APPROPRIATE ACTIVITIES
An enquiry into the optimal role of government, with a positive analysis of what municipal government currently
does and a normative analysis of what roles government is best equipped to fll. These roles broadly divide into an
ownership role, a regulatory role and an expenditure role, each of which can be over or under played. This stream
builds on concepts such as market failure, public goods and subsidiarity to identify which activities municipal
government does or does not have a comparative advantage over other levels of government.
Upcoming papers include enquiries into the proper role of municipal government as a regulator and as a distributor of
wealth.
43
3. CITIZEN SOVEREIGNTY
An enquiry into how well citizens can hold government to account, including monitoring of its activities and
protecting their natural rights. This stream investigates standards of municipal accounting and performance
reporting, open government, public safety and intergenerational equity. It considers concepts such as open
government and open data, and property rights.
Future papers in this series include enquiries into the quality of performance reporting, intergenerational equity with
respect to municipal government and open data projects.
4. THE OPEN SOCIETY
Open societies share power among a range of diferent institutions, unlike closed societies where it is vested in just
one. The Open Society is an enquiry into the role of diferent institutions in the city, including the church, charities
and associations. This stream has a historical element, it considers how these diferent elements have interacted in
the past and may do so in the future.
Published papers include an account of the role of civil society in building Calgary.
5. MUNICIPAL ISSUE PAPERS
This stream covers basic elements of public policy, including an introduction to the role of government at
municipal level, briefngs on areas of municipal policy and issue papers framed in terms of values, facts and ideas
of conservatism applied to municipal policy. Particularly salient policy areas include public safety, mobility and
afordability.
MANNING FOUNDATION FOR DEMOCRATIC EDUCATION
www.manningfoundation.org
[email protected]
403.536.8585
514 11 Ave SW
Calgary, AB T2R 0C8
44
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