THE BLOG

End the $4,800 Subsidy to Developers

10/04/2013 05:35 EDT | Updated 12/04/2013 05:12 EST

Developers are receiving a $4,800 per house subsidy for every new house that is built in new suburban communities. That subsidy cost you $33,000,000 in 2012. It's time for it to end.

All Calgarians currently subsidize development of new suburban communities by approximately $4,800 per home. In 2012, this subsidy cost Calgarians approximately $33,000,000. Eliminating this subsidy is one of the biggest issues we face as a city. For too long we have allowed new communities to be built without requiring developers to cover the cost of the infrastructure required to support them.

What is the $4,800 subsidy?

When a new community is built, a significant amount of infrastructure (roads, water pipes, waste water pipes, emergency services, recreation facilities and libraries) is required to support that community. Currently, approximately 78% of the cost of required infrastructure is paid by the development industry and 22% is paid by all Calgarians through their utility bills. This means that all Calgarians are subsidizing each new house built in a new community to the tune of $4,800. That might not seem like much, but with approximately 7,000 homes built in new communities last year, it resulted in a $33 million subsidy to developers. As a result of past development agreements, the City has accumulated a significant debt - well over $1.5 billion - which all ratepayers have to pay back.

Who wants to keep the subsidy?

The development industry has shown a willingness to negotiate a reduction in the subsidy, as evidenced by the 2011 Development Agreement and the City and the industry have been working cooperatively on a number of initiatives, including a new framework for managing growth. I am confident that a new agreement can be negotiated that will resolve this issue.

However, a small group of homebuilders have been organizing to elect candidates to protect their interest (since they ultimately benefit from the subsidy). This became clearly evident when the secret video of a meeting organized by Shane Homes' founder Cal Wenzel and Jayman Homes' founder Jay Westman, was released to Global Television.

Can we eliminate the subsidy?

Yes! This coming term, the City will be negotiating a new agreement with the development industry. Calgarians have been clear in their desire for more thoughtful growth in our city and eliminating this subsidy altogether is a major tool in accomplishing this objective. Let's foster a more balanced and financially sustainable approach to growth.

I encourage you to ask your councillor candidates about their opinion on this issue. Check out my questions to ask your councillor candidates.

To learn more, please read the backgrounder.

- Naheed