Among the most obscure things to become a controversial obsession at City Hall are 50 words of legalese buried in the middle of the planning act, words so unassuming they don’t even have a proper name—people just refer to them by their provincial-legislation chapter number: “Section 37.” It’s Toronto’s own catch-22, a bureaucratic riddle of a regulation that’s become a part of the everyday lingo.
Section 37 of the planning act says that if you want to build something in Toronto that’s bigger or houses more people than the Official Plan allows for—a super-tall condo tower, for example—you basically have to buy off the local councillor and the residents he or she represents. (The official wording: “The council of a local municipality may, in a by-law passed under Section 34, authorize increases in the height and density of development otherwise permitted by the by-law that will be permitted in return for the provision of such facilities, services or matters as are set out in the by-law.”)
Rob Ford calls this process a “shakedown,” and while there’s no implication that anything illegal takes place, or that local councillors benefit personally, you can kind of see why the mayor objects. A developer proposes a 34-storey tower. The city says, “Well, that’s not allowed. But if you talk to the local councillor and splash a few million bucks on the projects they want funded, we can smooth it out for you.” There are some vague guidelines and conflicting advice from various agencies, but really, Section 37 is designed to deliver benefits to the neighbourhood—playgrounds, public art, affordable housing, arts facilities, rec centres, and a host of other things. So essentially we’re using a loophole to pay to build needed community services—at least in neighbourhoods where developers want to build.
The problems with Section 37 are laid out in a report released last week by Institute of Municipal Finance and Governance, Munk School of Global Affairs fellow Aaron A. Moore, who notes there’s no hard-and-fast rule about how it works or what the price is. The councillor gets to negotiate what a developer will pay and what the money will be used for on an ad hoc basis. And there doesn’t even seem to be any clear rationale for why developers are paying or how the things they fund are connected to their buildings.
Moore’s report leads off with a 2005 example of towers in Yorkville that would have cast a shadow on a local schoolyard. To overcome the school’s objections, the developers paid $2 million to rebuild the school’s playground—part of $5 million in total Section 37 benefits paid to the city for that project. The school board took the developers up on the fancy new playground, even though it’s still in the shadows.
In the hands of a skilful councillor, this can be a useful community-building tool, and a lucrative one. Moore estimates that between 2007 and 2011, the city received $136 million in cash through Section 37, and at least as much through “in kind” benefits. But any money that comes in has to be spent in the ward where the development is happening. And development isn’t spread evenly across the city. Around $75 million, more than half the money, went to just three wards, two downtown and one in the heart of North York. By comparison, three other wards—Etobicoke-Lakeshore, York Centre, and Toronto-Danforth—received only about $5 million combined.
Besides, as Moore ably points out, the whole concept looks bad and creates bad incentives. If the developments themselves are bad for the neighbourhood, why are we allowing them to be built at all? And if the developments are good for the neighbourhood, why are we forbidding them unless they pitch in money for unrelated community projects? Well, for one, because developers will pay it. They profit by constructing bigger buildings, and if they need to kick some cash back to the city, they’ll do it.
Some politicians like it, especially because these funds are pretty much the only discretionary money ward councillors get to direct. And they can be effective that way: A local community centre renovation proposal will get passed over at budget time, but Section 37 can ride to the rescue. Adam Vaughan in particular has been skilled at using it to get developers to build family units or affordable units in a rapidly gentrifying, condo-based community—something that’s not explicitly mandated by the city.
Is it a problem that we’ve outsourced much of our funding and decision-making about community resources to private negotiations? I think so. There must be more open, fair, and effective ways to meet those legitimate city-building objectives. As Moore suggests in his report, it’s a tangled mess that really should be changed.