Dealing with developers: municipal bonusing spurs debate

By Raja Moussaoui , CBC News Posted: Apr 25, 2013 1:24 PM ET Last Updated: Apr 25, 2013
8:45 PM ET

Section 37 agreements allow municipalities to secure benefits for a community undergoing
significant land development. (Andrew Lupton/CBC)
In November of last year, a shouting match erupted in Toronto city council chambers. Mayor
Rob Ford hurled accusations at Coun. Adam Vaughan, calling a $1 million deal that Vaughan
secured with a developer a "shakedown."
Ford’s outburst is just one snippet in a much greater debate over the ambiguous, ad hoc nature
of Section 37 of the Planning Act, a "density for benefit" agreement introduced by the province
in 1983. It allows municipalities in Ontario to secure benefits for a community undergoing
significant land development. In Toronto, ward councillors can negotiate cash and in-kind
benefits from developers looking to build higher and with greater density than is allowed in the
zoning.
"Some people think that it’s just a form of blackmail," said deputy mayor Doug Holyday. "A
developer can get more density and make more profit off of a piece of land by paying off the city.
In some cases, the money coming into certain areas is astronomical."
A recent paper by Aaron Moore from the Institute on Municipal Finance and Governance
reports that from 2007 to 2011, 159 agreements were reached under Section 37, which includes
386 separate benefits.
'Too much power in councillors' hands'
These benefits included improvements to public parks, playground and commissioned public
artworks. While almost half of these benefits were paid in-kind, the cash benefits alone garnered
$137 million.
While the city planning department negotiates the value of the Section 37 benefits, it is up to the
discretion of the individual ward councillor of the development area to decide how those
benefits will be allocated. Holyday says the planning department needs to take a stronger role in
these decisions.

"There is too much power in [the councillors’] hands," he said. "You run the risk of a councillor
putting the money into things that could be the best for them come election time."
Vaughan vehemently disagrees. "The notion that politicians shouldn’t have any power is
absurd," he said.
As a result of the condo boom his downtown ward (Ward 20, Trinity-Spadina) Vaughan has
negotiated many Section 37 agreements with developers. Top on his agenda is securing these
funds for affordable housing.
"When people say that the power should be trusted to bureaucrats, not to the democratically
elected people, what they’re saying is that the community should have no power," said Vaughan.
"I find that offensive."
Patrick Devine is a development lawyer who has practised municipal and planning law in
Toronto for the past 35 years. He says these spending decisions lack oversight by the planning
department, are not governed by a defined process and are not linked to a policy that addresses
larger planning goals.
"There is a disconnect here between the development process, which is detailed and rigorous,
and the more ad hoc approach followed by Section 37," said Devine.
Devine says that city staff has done a good job of trying to standardize the system by creating a
set of guidelines. The problem, however, is that some councillors choose not to follow it.
"Section 37 is not being used in the way that it was intended," said Devine.
A tool for 'good planning'
Since the city’s Official Plan calls for increased development in certain areas — along major
roads, near public transit, and within downtown — Toronto city council has approved many new
developments that exceed the outdated zoning bylaws.
If city planning determines the development represents "good planning" and zoning approval is
granted, then Section 37 benefit agreements are negotiated. They are meant to give areas
experiencing growth a way to improve their community services and amenities.
"It’s a planning tool to enhance the quality of the environment where a development takes place
to make good planning better," says Peter Langdon, acting manager of the city’s planning
division.
The approval process: how it works
In Toronto, Section 37 agreements are negotiated on a case-by-case basis. Here is the process:

The developer approaches the city planning department to increase the density on the
site to greater than what is permitted by the zoning bylaw.

If the city planner agrees, the appraisals section of the city’s real estate services estimates
the value of the additional density at that particular site.

In many cases, the city planner tries to secure 15 to 20 per cent of the value for Section
37 benefits from the developer.

The councillor approaches the developer with a list of benefits or amenities that they
would like to secure, which they negotiate.

The city’s guidelines state that Section 37 agreements cannot be applied across the board as a
standard percentage, for fear that the benefits could be construed as an illegal tax. Under these
guidelines, each agreement is negotiated on a case-by-case basis.
Issues surrounding Section 37
A lack of clarity: Aaron Moore, PhD, and post-doctoral fellow at the IMFG and author of
"Trading Density for Benefits: Section 37 Agreements in Toronto" points to the vague wording of
"facilities, services or matters" in the Planning Act. He sites this lack of clarity is as problematic,
resulting in a number of contradicting interpretations of what constitutes Section 37 benefits.
For example, The Ontario Ministry of Municipal Affairs and Housing states that the benefits
could be put toward "intensification, growth management and transit supportiveness."
Meanwhile, the Ontario Municipal Board insists on a direct connection between the building
proposal and the community benefit, such as building a park or playground adjacent to the new
development.
In 2007, in an effort to resolve the confusion, the City of Toronto created a set of guidelines
and protocols. This document states that the Section 37 benefits have to be spent on specific
capital projects and goes on to list a number of permissible categories including heritage
conservation, affordable housing, daycare centres, public art, playgrounds and improvement to
transit facilities.
The city’s guidelines state that planning staff should assist the ward councillor with negotiating
the benefit agreements. Staff is supposed to recommend when it is appropriate to ask for
benefits, what types of benefits to request and how to uphold Official Plan policies. But these
guidelines are often not followed.
Power concentrated in the hands of the ward councillor: The ward councillor decides
whether or not to take the advice of the planning department and whether to consult with the
public after the benefits have been secured.
"The ward councillor and the community council are not bound by the opinion of the planning
staff," said Langdon.
"There are some councillors who will negotiate directly with the developer about community
benefits," says Langdon. He says that although it is not in line with the protocol, it sometimes
has a beneficial effect.

"The ward councillor has a lot of influence with the developer with respect to the approval of the
application at the community council level," said Langdon. "Sometimes they can negotiate
benefits of a higher value then staff might be able to do."
But he says this approach comes with drawbacks: the Official Plan policies may not be followed
if Section 37 funds are negotiated without consultation with city staff.
"The art of city building is properly invested in the politicians that run council. And to pretend
that technocrats who have a job at the City of Toronto can come in and change that, is absolute
insanity," says Vaughan.
Councillors can act as 'ward dictators'
Former Toronto budget chief David Soknacki recently wrote an article titled "Reforming City
Revenue" for Novae Res Urbis, an urban planning and municipal government publication.
He writes: "City planning officials have little defence against the practice of councillors acting as
ward dictators — establishing personal priorities for amenities and inserting them into
negotiations ....To ensure a consistent, meaningful use of Section 37... all development decisions
should be approved at city-wide committees and from there, at council."
How the money is being spent
Moore notes in his paper there has been little public debate about these agreements and, so far,
the majority of the spending has been varied, inconsistent and spread across a number of small
projects.
One key trend identified in Moore’s paper is that most of the spending has been in the form of
"desirable visual amenities" such as parks, roads, streetscapes and public art.
He points out that to date, only six per cent of the funds have gone toward affordable housing,
an area where other municipalities in Canada and the United States have focused their density
agreement funds.
Vaughan is working to change that trend. He has backed a motion in council that is part of an
overall objective to establish a framework for securing affordable housing through Section 37
agreements.
"We’ve been doing it on an ad hoc basis, and we want a legal and policy framework so it becomes
consistent on a site-by-site basis."
But he strongly opposes the criticism of Toronto’s Section 37 agreements in Moore’s paper.
"Could it be more prescriptive? Yes. But I take issue with the underlined assumptions which are
present in this report," said Vaughan. "Priorities aren’t always set by government. If the people
of the city aren’t setting the priorities, then it’s not a democracy."
Money left unspent

Most of the Section 37 funds the city has secured has not been spent.
Of the $137 million in cash benefits that have been secured by the city from 2007 to 2011, $63
million has been received, and only $11 million has been spent.
The city doesn’t receive any funds until the development is in use, but Moore explains that even
once the city has the money, often it remains frozen in bureaucratic processes.
Sometimes this is due to a lack of communication between the ward councillor who secures the
benefit and the various city departments that co-ordinate city projects, such as the parks
department or the transportation department. Also, if a city department has other priorities they
may not have the time to focus on a new project. In some cases, they may not even be aware that
the money has become available.
"The delay on spending the funds is a dilemma for us," said Langdon. "We wish the money could
be spent more quickly then they have been." He says they are trying to address the issue through
better communication.
Confusion over development charges vs. Section 37
The funds that come under Section 37 are not the only funds that municipalities receive from a
new development. Other charges include a land transfer tax, an assessment of growth, as well as
ongoing tax revenues.
Most notably, there is the Development Charges Act, which follows that a municipality should
not have to carry the financial burden of new development.
The city undergoes a detailed analysis and comes up with a list of development charges that
includes funding for police services, libraries, parks, waters, sewers and roads, to determine the
funding needed for a new development to pay for itself.
This set of itemized development charges must be paid by the developer before a building
permit is granted, to cover the impact that the new development places on city services.
Critics of the Section 37 agreement say that this rigorous process of establishing development
charges, stands in stark comparison to the ad hoc application of Section 37 funds.
Sharing the wealth
Moore’s paper also points to the fact that most of the Section 37 benefits secured have been
concentrated in a few downtown wards, including Vaughan’s, as a result of the condo boom.
Councillors who represent wards outside these high-growth areas have expressed concern that
Section 37 money should be spent in a way that benefits the entire city.
"You can say Section 37 lands in just a few neighbourhoods, because that’s what it’s there for,"
said Vaughan. "There are development dollars that get accrued in the city that never get spent in
the wards that are experiencing growth, because they have enough capital through Section 37."

Vaughan says it’s possible to secure more city-wide money from developers by increasing the
rate of development charges.
"The councillors who want more money out of a development, don’t want to take it from a
developer, they want to take it from communities that are experiencing the growth," said
Vaughan.
Section 37 case Studies:
To give an idea of the kind of projects paid for by Section 37 money, here are comparative
examples of Section 37 benefits valued at $1 million
Example 1:
Location: Ward 20 - 181, 9, 203 Richmond St. W., 10 Nelson St.
Councillor: Adam Vaughan.
Council Approval Date: Feb. 8, 2011.
Breakdown:
$100,000: Affordable housing
$900,000: Improvements to streetscape along John St. between Queen St. W. and Front St. W.;
streetscape improvements along Richmond Street West between University Avenue and
Spadina; streetscape improvements to Nelson Street, heritage conservation studies for the
King / Spadina East Precinct.
Example 2:
Location: Ward 38 - 50,60,70 Town Centre Court and Lands Adjacent to Albert Campbell
Square Extending to Town Centre Court.
Councillor: Glenn De Baeremaeker.
Council Approval Date: April. 14, 2005.
Breakdown:
$500,000: children’s playgrounds and equipment at Trudelle St. Park, and along McCowan Rd.
$100,000: Scar Animal Centre improvements such as Dog Kennel Construction Project
$80,000: parks or trees planting or school playgrounds.
$20,000: Scarborough flags for municipal and civic purposes by City and Councillor.
$100,000: Scarborough Walk of Fame.
$200,000: playgrounds for parks and schools close to Scarborough Centre.

Example 3:
Location: Ward 18, 2-6 Lisgar Street
Councillor: Ana Bailao
Council Approval Date: May, 6, 2011
Breakdown:
$1 million: Affordable live/work studios or artist work studios, design and construction of
Lisgar Park, renovation and restoration of Carnegie Library building, and/or public art in the
vicinity.
Example 4:
Value of benefits: $1 million
Location: Ward 27, 568-580 Jarvis St., 99-103 Charles St. E
Councillor: Kyle Rae.
Council Approval Date: May 27, 2009.
Breakdown:
$1 million : Proposed Community Centre pool at Sherbourne/Wellesley and the Jarvis St.
improvement project; at least $400,000 will be spent on public art.
http://www.cbc.ca/news/canada/toronto/dealing-with-developers-municipal-bonusing-spursdebate-1.1382669