Development charges are important in helping municipalities to achieve fiscal sustainability. They can:
- allow municipal governments to recover the financial costs that new developments impose on them;
- help ensure horizontal equity and;
- provide a potential incentive to efficient forms of development.
In order to achieve these goals, development charges need to be structured properly. A number of problems introduced by Ontario's 1997 legislative amendments need to be corrected. Key changes needed include:
- completing the list of eligible costs so that they include all costs caused by new developments;
- removing the backward-looking 10-year average service level cap; and,
- removing the 10% discount on some costs.
Because prices are a strong influence on decisions, in order to achieve their policy goals governments will need to work to align prices with those goals. Where prices are pulling in the direction of policy goals, it will be much easier to achieve those goals. Where prices are pulling in the opposite direction, it will be very difficult to achieve policy goals.
Governments in Canada - and in all developed countries - already employ pricing policy to help achieve their policy goals, e.g. to promote retirement savings (RRSP tax deductions) and reduce youth tobacco consumption (tobacco taxes). The Government of Ontario could change development charge structures in order to help achieve provincial policy goals, and to help municipalities achieve their goals.
Government of Ontario policy relating to urban form is to reduce suburban sprawl, direct growth to built-up areas, use land efficiently, and thereby minimize negative impacts to air quality and climate change, and promote energy efficiency.