In June 2009, I was reading a book by Jeb Brugmann titled Welcome to the Urban Revolution: How cities are changing the world. It was very thought provoking and well-written providing an excellent analysis of the historical, contemporary and future salience of cities in shaping the world. The book presents a thorough overview of the connection between high density areas in the developing world and the influence this has on establishing both local markets and globalization.
Here is excerpt from the book that inspired a section of my honours thesis and a fourth year research paper:
“There are two aspects to density in the growth of cities. Proximity reduces time and energy and therefore the cost required to move people and materials around to achieve any objective. Take an urban water system. If we are building a water system for a suburban neighbourhood where homes are 120 feet apart versus a downtown neighbourhood where homes are twenty feet apart, we have to use one hundred feet of extra pipe for each home in the lower-density neighbourhood. If each neighbourhood has one hundred houses, then a higher-density neighbourhood saves an impressive two miles of pipe – not to mention the costs for installation and maintenance and for pumping the water through it. But in my city, a person living in a low-density neighbourhood pays the same rate for water as the people in my high density neighbourhood. The water department loses money on the low-density neighbourhood, and our neighbourhood must help make up the difference through our water rates and tax payments”.
Jeb is referring to Toronto in this case. While this sort of system may not be true for all jurisdictions, it nonetheless provides an illustration of the link between density and public service payments associated with housing location and water distribution.
To remedy this inequitable system, and to encourage growth in urban areas, I wanted to share a proposal with you. As I learned from my research, in Peterborough, when developers want to build sub-divisions in the fringes of urban areas, they are required to pay development charges for the houses to cover the costs of piping installation, water delivery, treatment and storage. Why? Because it costs the City's water utilities a lot more money to build additional (and longer pipes) and to deliver the water to those homes because they are farther away from the water treatment plant. Longer distance from the plant means more money. So in theory, the development charges cover these infrastructural costs.
Under my proposed system, sub-division developers would continue to pay the respective development fee per sub-division lot. However, 10-15 percent of this charge would go toward an “urban growth fund” used to encourage and subsidize developers wishing to build in the city’s built area (i.e. areas that are already paved over and could use redevelopment).
To illustrate a fictitious situation, let’s say a developer was paying $5,000 per lot in development charges. The sub-division has about 200 lots. Therefore, $5,000 x 200 lots = $1,000,000.
Therefore, 0.15 x 5000 (per sub-division lot) = $750. $750 per lot x 200 lots (total number of lots in subdivision) = $150,000. Thus, of the $1,000,000 raised in development fees from the sub-division, $150,000 would be directed towards the urban growth fund.
This would be used to subsidize developers wishing to build in the urban growth area and overtime, this can significantly alleviate pressure on public service provision. Remember, even if the development charge is paid by the developer, over time, it still costs more money and uses more energy to distribute water to those homes farther away from the system. The urban growth fund is for long-term sustainability to encourage more urban development and to keep public service provision more efficient and more local.
The $5000 figure is simply an arbitrary fee; the cost of the development charges for each sub-division could be different and set by the city. Setting the development charges for each sub-division can be raised or lowered depending on the topography of the sub-division’s land, distance from public facilities (water, wastewater and electricity), amount of impervious cover already on site and other factors as well. I propose the arbitrary fee of $5000 to illustrate how revenue could be generated, especially if the city wishes to intensify land uses and create a more compact urban form.
The proposed urban growth fund can raise significant revenue and provide more budgetary flexibility for a city. This could be one solution for cities (such as the one Jeb describes) to ensure that water departments are not unfairly charging higher water rates for those high-density neighbourhoods while concomitantly encouraging more urban growth (which could save costs in the long-term). Whether such a system would ever materialize is up for debate; I figure there are many policy tools we could use, but putting them into practice can be a difficult and laborious process.
Key message: Water rates in any jurisdiction should be adjusted based on density and proximity to water mains and pipes; this is an equitable approach to public service provision. If a jurisdiction has set suburban development charges for public service provision, then it would be wise to redistribute some of this revenue to mechanisms that can encourage more urban growth and overtime reduce pressure on undeveloped land.
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