Canadian Centre for Economic Analysis

Population and Job Growth Planning: Socioeconomic Issues with Places to Grow

Background

Regional municipal planning is a crucial aspect of strategic economic development. Decisions made today create ripple-like impacts throughout the region—impacting each aspect from government finances, industry production, and individual income, to macro-level economic and population growth, environmental conservation, and the capacity of infrastructure to sustain all of that activity. Further complicating the problem of municipal planning is the diversity among regions, each of which must be uniquely appreciated in terms of its potential and its limitations in conjunction with the relationships it has with the regions around it.

The strategies behind growth naturally must anticipate future needs, allocate resources accordingly, manage risk associated with uncertainty, and correspond to a vision for how and where development should occur. In Ontario in 2005, such a vision for development was legislated through the Places to Grow Act. In order to combat the accelerated urbanization of green space and agricultural land, while simultaneously supporting expected increases in population and encouraging economic growth, the Places to Grow Act calls for a harmonized approach across different regions. To support the mandates of the Places to Grow Act for regions within the Greater Golden Horseshoe, long-term projections for “land use, infrastructure, and financial planning” were generated for the diverse constituent regions and municipalities of the Greater Golden Horseshoe.

Risks of Planning to Places to Grow

Despite a concerted effort to create a unified plan towards rational growth management, the implementation of the plan has not occurred exactly as prescribed, particularly with respect to some of its provisions. These include intensification targets and the protection of agricultural land, neither of which have been pursued according to original standards. Specifically, the Outer Ring of the Greater Golden Horseshoe is not aiming for the density targets outlined in the Places to Grow Act, while Durham, Simcoe County, York Region, and others have allegedly implemented development plans that do not adequately protect agricultural land and environmentally sensitive areas. Beyond potential issues associated with the way that the Places to Grow Act has been operationalized, matters have been complicated further by the fact that the projections to which regions are required to plan land use, infrastructure investment, and fiscal finances are not being realized. In most cases across the GTHA, planning and servicing lands to the employment projections provided through the Places to Grow Act may leave regional and municipal governments in debt. The reason for this is that infrastructure investment outlays must be made in advance of when population and employment growth is expected. Once growth begins to occur, municipalities and regions receive development charge revenues, which are then used to relieve growth-related capital debt.

However, if regions are planning for and servicing more employment lands than would be necessary for the actual number of jobs realized, then the GTHA is liable to face increasing debt across its government balance sheets. In order for governments to continue to deliver services to residents, and pay down debt, alternate fiscal measures would need to be leveraged in order to raise adequate levels of revenue to cover excessive overcapitalization of the region. Alternatively, development charges may be increased as a response. This will, in turn, decrease regional affordability, hamper new private capital attraction and potentially threaten the credit ratings of municipal and regional governments.

Conclusions

Ensuring that economic growth conforms to the guiding principles of sustainability, environmental conservation, and prosperity is a multi-faceted problem. This necessitates co-ordination and careful implementation of development targets, as well as equitable participation in the support of those principles and in guided growth among all of the municipalities and regions in the Greater Golden Horseshoe. This necessitates projections and forecasts so that municipalities can plan their land use, allocate resources, and manage the risk associated with the necessary debt financing for growth.

The growth plan designed for the Greater Golden Horseshoe, under the Places to Grow Act, features such projections for all constituent regions. If growth occurred as suggested by these projections, then the case study for the Region of Peel offers a glimpse into the numerous benefits that such growth can offer. Among these is a projected 47% increase in regional GDP between 2014 and 2041, a 35% increase in the number of employed residents of Peel, a 23% increase in the number of jobs within Peel, 87% more non-residential private capital investment, and others.

However, the case study for the Region of Peel has also illustrated a variety of risks that accompany the process of planning for and accommodating growth. For instance, Peel would have to invest over $16 billion in growth-supporting capital between 2014 and 2041. With 35% of this total supported by development charge revenues, Peel is required to take on a risky investment into infrastructure under the premise that future growth would finance these present outlays. The investment becomes risky when the revenue streams are not assured. In fact, the discrepancy between PaR and Places to Grow job projections rises to over 182,400 by 2041. If those jobs are not realized within Peel Region, then Peel would have over-invested in employment lands and would be left with over $2 billion in stranded debt on its balance sheet looking for a revenue source to pay it down.

Unfortunately, the Region of Peel is not the only region in the GTHA that is planning to ambitious employment figures prescribed by Places to Grow. In fact, every region in the GTHA aside from Toronto is at risk of over-developing employment lands, incurring outstanding debt by 2041, and threatening agricultural lands and environmentally sensitive areas . In addition, co-ordinated investment is not only a municipal affair; adequate support from the provincial and federal government—as is demonstrated in the case study for the Region of Peel—is necessary in order to fully leverage and utilize assets, thereby facilitating growth.

As regions and municipalities invest and plan to the optimistic employment projections of Places to Grow, the risk is transferred to residents. Failing to set and meet intensification targets may mean that growth is more expensive. Similarly, generating outstanding municipal or regional debt as a result of high projections will likely require the increase of taxes, or the use of other financial instruments, in order to recover the debt that will remain on municipal balance sheets. Preventing all risks is implausible; however the strength of the dynamic baselines of a model such as PaR is that it can mitigate uncertainty associated with the projections that are used as a benchmark for our economic future.