Growth Must Pay for Growth, Not Taxpayers – City Responds to Development Industry Report

Today, City Council received a staff report outlining how funds collected from developers are used to ensure infrastructure and services keep up with the fast pace of growth in the City without impacting housing affordability.

“Mississauga is experiencing tremendous growth and is becoming a world-class city that people from all walks of life want to call home,” said Mayor Bonnie Crombie. “We’re pleased that developers see the value of building in our City and want to be part of the transformation. As we work to build our city, it’s important that growth pays for growth. Cities are facing a financial crunch and the costs associated with expanding our infrastructure to accommodate these new developments cannot be absorbed by our taxpayers.”

The City staff report provides important Mississauga-specific context in response to a newly-released study commissioned by the Building Industry and Land Development Association (BILD), which examines development-related charges in 16 GTA municipalities.

The BILD study asserts that municipalities who maintain large reserve fund balances are impacting housing affordability and falling behind in providing community amenities and infrastructure, like roads, parkland, recreation space and libraries.

“Mississauga uses the funds we collect to build city amenities,” said Paul Mitcham, City Manager and Chief Administration Officer.  “But to build a great city for the long term, we must plan for growth by managing our finances responsibly and in a way that ensures our infrastructure, community services, parks and public spaces can support both our existing communities and new developments.”

According to the staff report, by combining all municipalities together, the BILD study overlooks the unique financial practices each municipality has for managing how best to plan for and deliver the infrastructure and services its community needs. It also does not distinguish between cities like Mississauga where development is occurring in built-out areas, and cities like Vaughan and Brampton which still have greenfield development opportunities.

Mitcham added, “Mississauga has a sound financial plan to manage development-related funding so that the full cost of paying for new growth is not on the shoulders of taxpayers.”

Funds are collected from developers through tools such as Development Charges (DC) and Cash-in-Lieu (CIL) payments for parkland. These funds then help pay for new or expanded infrastructure and services related to growth such as roads, fire stations, parks and transit services.

“Developers are required by provincial legislation to contribute to the growth-related costs associated with their new developments. The City of Mississauga has a set of practices in place to responsibly manage those funds and ensure they are spent wisely and where they are most needed,” said Shari Lichterman, Commissioner of Corporate Services and Chief Financial Officer. “We take our financial management role very seriously and have consistently been rewarded for our efforts, most recently by Standard & Poor’s Rating Services (S&P) with a AAA credit rating for the 18^th year in a row.”

In the past six years, the total annual value of all issued building permits in Mississauga has averaged $1.5 billion. The City surpassed its DC revenue projections in 2018, 2019 and 2020. From 2013 to 2019, the City achieved 80 per cent of its revenue projections.

The City’s practice for responsibly managing the DC and the Parkland CIL reserves includes:

• Ensuring one year’s worth of DC revenue is kept in reserve in the event projected revenues are less than expected due to economic issues. This means that construction projects underway will still have the required funds to be completed if there is a downturn in the economy.
• Carefully planning the Parkland CIL reserve to ensure funds are available when needed to acquire new parks and to improve or erect buildings for park or recreational purposes.
• Collecting CIL funds that reflect market value as land values continue to increase. While acquiring land takes time, the City has been diligent in identifying opportunities and purchasing lands to increase parkland.

The staff report also highlights the results of a 2019 study commissioned by the City to help clarify the relationship between development-related costs and housing affordability. While the question of who ultimately pays for development-related fees is complex, the research shows that:

• House prices are determined based on supply and demand – not development-related costs.
• The DC portion of the overall cost of the average sale value of homes in Mississauga is 5.5% for a single/semi-detached unit and 6.5% for a small apartment unit, a nominal portion of the overall cost for a dwelling unit.

The BILD study also suggests that housing supply shortages caused by lengthy municipal planning processes and servicing issues may be having a direct impact on each municipality’s ability to meet their DC revenue forecasts.

“Mississauga has approved approximately 20,000 housing units that are ready and waiting for developers to pull their building permits and start construction,” said Andrew Whittemore, Commissioner of Planning and Building. “While we’re confident that our planning processes are not delaying the housing supply, we’re focused on making continuous improvements to streamline our review and approvals processes to make it even more efficient for developers to bring quality housing to our city.”

Staff are currently working on updating the City’s DC and Parkland Conveyance By-laws and are developing a strategy for the new Community Benefits Charge (CBC). The draft DC Background Study, CBC Strategy, and Parkland Conveyance By-law will be released early next year for public, industry and stakeholder feedback.