The City of Calgary’s property tax system combined with under assessed lot levies for new suburban developments are two major factors in the continuing sprawling growth of our city. Economics plays a significant role when making a decision to purchase a new home. Home buyers strive to balance their perception of value with their desired lifestyle. Typically, if a buyer believes they can get better real estate value in a suburban development, they will sacrifice lifestyle and location.

City policies around lot service costs and property taxes have a significant effect in determining the make up of our city. Municipal government initiatives influence housing committees and area redevelopment plans that form the basis of where and what is developed.

The current market value property tax system does not accurately reflect the benefits home buyers in areas of the city receive. Suburban communities generate significantly higher costs for services than existing inner-city areas. On balance, this is fine as long as people are paying fully for the services they receive. This would include construction, maintenance, snow removal and policing of our roadway system that takes suburbanites to and from work every day. But the current market value tax system determines the amount of tax that home owners pay regardless of the services they use. This type of policy can dramatically influence a buyer’s decision whether or not to purchase a new home in an inner-city development.

Just as it would be ludicrous to subsidize a person’s car insurance and gasoline costs so that they can balance transportation costs associated with living in an outlying community, it is just as outrageous that inner city developers and home owners subsidize the cost of roads built for suburban development. Inner city development should be allowed to compete on a level playing field. This argument would be strengthened by an in-depth study to determine actual costs of services for different areas of the city. One thing that is certain is that under the current market value property tax system, lifestyle and economic benefits do not match revenue generated.

As a business professional, I believe in the free market system and that people should be able to decide where they want to live provided they are willing to pay the full economic costs of doing so. Although there has been significant growth in close-in communities in the past few years, this growth is but a fraction of what has occurred on the periphery. Cross-subsidized infrastructure costs allow development of outlying communities to flourish while at the same time draw from a pool that could otherwise result in dynamic revitalization of existing inner city land and services. It would be nice, for example, if the cost of one interchange could be spent on improving the base infrastructure in the East Village.

A report titled The Economics of Urban Form conducted for the Ontario provincial government identifies that infrastructure savings could result from a more compact urban form and indicates the Ontario government could save up to $20 billion dollars in capital infrastructure costs over the next 20 years and up to $1 billion dollars per year in operating and maintenance costs by altering the form of urban development in the Greater Toronto area. The report also points out that this does mean an alternative lifestyle to the suburban single family front door or backyard but it also states that by using existing land and infrastructure more efficiently, the resulting lifestyle and economic perspective could be brought into balance. The report clearly states there is a substantial cross-subsidization of lower density suburban development by higher density urban areas. With all levels of government stretched to the breaking point in terms of deficit and debt load and with Canadians growing weary with rising taxes and user fees, it certainly makes sense to take a hard look at how we finance the continued growth of suburban communities.

Calgary’s GoPlan study Sustainability: Should It Be The Ethic For Transportation Planning in the 90’s? states that the expense of construction and maintenance of a vast array of road infrastructure and services could be avoided if there were more infill redevelopment. It can be argued that home owners who choose to live in the suburbs are not paying the full economic cost of their lifestyle choices. The issue of subsidized costs for freeway extensions, the LRT, the widening of roads, repair and maintenance of the roadways, the additional maintenance on sewer and water lines and so on remains a question of economics that all tax payers must address. The higher costs associated with suburban development such as additional police, fire, ambulance and utility services are shared among all tax payers regardless of whether or not they utilize suburban services.

We can extend this argument to include that peripheral area development is also leading to a suburban sprawling mess that results in a car oriented society. It seems we have created regional communities where the need to drive to work, shop or for leisure endeavors takes precedence over economic and environmental common sense. While many admire the truly vibrant urban environment of cities such as Vancouver, Seattle, Portland, New York, few participate in endeavors that would encourage the much needed change at municipal government levels that could lead to Calgary being counted among them.

How can it be determined that home buyers in Calgary are in favor of further peripheral growth if tracking buying preferences can not be assessed on the basis of home buyers being fully informed of the potential tax benefits of inner city development alternatives? Maybe home buyers would prefer to live closer in if they were adequately informed of how their tax dollars could be better utilized by bringing suburban and inner city development into balance.

 Growth is good for this City. While responsible management at the government level is critical to sustained growth, it is the market that should determine area development and alternative housing forms. On these points there is unanimous agreement in the development community. If Calgarians are purchasing new homes based on a flawed property tax system that subsidizes inefficient suburban sprawl, it is a disservice to all tax payers. An attempt to match services consumed to costs paid is necessary so the market can make choices based on complete economic responsibility. There are many ways to accomplish this but I’m afraid we’re going to run out of money to support sustainable growth before we make the hard choices.