Understanding how municipal infrastructure is funded is an important part of managing local growth. The Association of Municipalities of Ontario (AMO) recently published a straightforward breakdown on Development Charges (DCs) and reserve funds.
MYTH #1: If DCs didn’t exist homes would be more affordable
Reality: DCs are a partial cost recovery tool that is used to pay for growth related infrastructure.
If DCs did not exist, the cost to build housing-enabling infrastructure would still be borne by homeowners through higher property taxes and utility rates.
Property taxes would have to increase by 13%, leading to higher monthly carrying costs and gross debt service (GDS) ratio for homeowners.
In addition, many existing homeowners paid DCs to fund their share of the growth costs when their homes were built.
MYTH #2: Municipalities have ample reserves to pay for growth
Reality: DC reserves and almost all non-DC reserve funds are committed to specific projects.
Reserve funds are heavily regulated by the province, which require municipalities to use these funds for specific purposes.
These purposes include keeping infrastructure in a state of good repair, investing in new infrastructure to support housing and economic growth, and to provide full transparency in reporting.
Having spent over seven years working with AMO to advance municipal fiscal sustainability across the province, I know firsthand how essential these financial tools are. True fiscal responsibility means ensuring that growth pays for growth, rather than shifting the financial burden of new development onto the backs of current taxpayers.