In July 2018, a month after passing a new climate plan, Calgary city council approved 14 new communities on the city's outskirts. But the housing market has slowed, and now city hall is bracing for a shortfall of $57-million—and counting—as developer levies fail to keep up with infrastructure costs.

This episode marks the beginning of our new pop-up, S11: Sprawl on Sprawl, focusing on how our city is growing—and the true costs of these decisions. A full transcript is below.

MAYOR NAHEED NENSHI: And so I look in this and I see, as Councillor Farrell pointed out, that there are cuts to transit, that there are cuts to pedestrians, but that there are no substantial cuts to roads and to motorists. But our policy says we have a pyramid: that we focus on pedestrians first, transit second, and roads third. And yet when we're making the decisions that matter – the money decisions – sometimes we forget what our policy actually says.

JEREMY KLASZUS (HOST): That's Mayor Naheed Nenshi speaking at council on February 4. Council had met to reevaluate its capital budget in light of cuts from the UCP government.

MAYOR NAHEED NENSHI: And I think citizens need to understand the cumulative effect of the ginormous cuts that we have been asked to take by the government of Alberta. People need to know that the cut of $100 million to an already funded program in community transit means that we had to order fewer LRV cars at a higher price per car. That's not good fiscal management. That's wasting money.

JEREMY: LRV cars – he's talking there about CTrain cars.

JEREMY: It's true that the cuts from the UCP government will hurt cities big time in the long run, but it's also pretty rich for city council to be pleading poor in the short term in light of decisions that they've made over the last couple years. Remember that last March they were warned by the city's chief financial officer not to go ahead with all of four major capital projects, including the arena and BMO Centre expansion, in part because the political landscape could be changing.

CARLA MALE (MARCH 2019): At this time, I would be comfortable moving forward with one project.

JEREMY: But city council wanted it all, so they approved all four. And then later last July, they approved $290 million for the new Flames arena. While everyone else was bracing for the UCP's first budget, city council rushed to use up capital dollars. Here's Nenshi when the arena deal was announced last July.

MAYOR NENSHI: We thought that at this point, it makes sense to take that money and put it to work for Calgarians, rather than have it sit it in a bank account.

JEREMY: So the arena deal gets rushed through in July. Then in October the UCP budget comes down, and sure enough, it's bad news for cities, particularly Edmonton and Calgary. And now city council's in the position of trying to figure out: Where do we make up for this shortfall in funding?

JEREMY: As admin put together proposed cuts, some things were excluded – specifically, the four major capital projects, including the BMO Centre and the arena.

And another thing that wasn't touched was the 14 new communities that city council approved in July 2018.

Here's councillor Druh Farrell asking questions of Stuart Dalgleish, who's the general manager of planning and development for the city of Calgary.

COUNCILLOR DRUH FARRELL (FEB 4): Could you explain why, again, growth wasn't impacted? We didn't cut in areas that haven't even begun – people who don't live here yet? Could you explain how you arrived at that decision?

STUART DALGLEISH: I would simply say that growth was considered in the process. We worked as a corporate team…

JEREMY: As you heard Nenshi say at the start of the show, the cuts included cuts to transit, to pedestrian infrastructure like sidewalks, and they also took some out of the affordable housing budget – because you can always cut there, right? No one will put up much of a fuss.

Not so, though, when it comes to developers and those 14 new communities.

DALGLEISH: When it comes to new and actively developing communities, there were commitments made by council to investments in those areas. We have obligations around those commitments.

JEREMY: This is a show that I've wanted to make for a long time – for like a year and a half, since those 14 new communities were approved in July 2018, in the middle of summer.

This is the oldest trick in the book: Push contentious stuff through in the dog days of summer, when newsrooms are under-resourced. People are on vacation. It's the last council meeting before council's summer break, and then everybody disappears – and hopefully any controversy dies down and goes away.

They did it in 2018 with the 14 new communities; they did it last year with the arena deal.

But one thing has always bugged me whenever I hear mention of these 14 new communities. There's always been a missing piece for me, and that is: What were they thinking?

And I don't mean that pejoratively. I mean, really: What were they thinking? And that's something I've heard a lot from the public as well.

Aren't we supposed to be curbing sprawl, rather than adding more car-dependent suburbs? Doesn't the city of Calgary have a climate plan it's supposed to be following? And, hey, whatever happened to the Municipal Development Plan? That's the plan that was approved a decade ago by city council to shift growth from outlying areas, basically to stop sprawl, and shift growth into developed areas.

Let’s go back to July 30, 2018.

DALGLEISH: Your Worship, members of council, today is another significant step in the journey we're on to make decisions about where our city should grow and change in the newly developing areas of Calgary.

JEREMY: In the summer of 2018, Calgary already had 27 new communities in the works, in various stages of completion. The 14 new communities that council approved that day were added on top of these. The other important thing you need to know is that admin originally recommended eight communities, and city council kept adding to this. When admin first brought the initial eight communities to a council committee in June 2018, they let council know that this was already more than usual. This was getting pretty high. But the thinking was, we need to keep people and developers from going to Airdrie and Okotoks and Chestermere instead.

Here's how city admin put it in a report to council: "By not opening areas for new community development now, the city risks the flight of capital investment to other markets where a return on investment could be realized.”

So admin had initially recommended eight communities, but councillors, in June 2018, asked admin to go out and find more business cases to approve. They basically said, okay, here's these eight, but can you find us some more? And so when admin came back to council on July 30, they came with a list of 11 communities.

This is Kathy Davies Murphy, the city's manager of growth.

KATHY DAVIES MURPHY (JULY 30, 2018): By final buildout, these communities will add an estimated $62 million to the operating budget in direct incremental costs. This is not the total operating cost of the communities of buildout, but only includes the direct incremental costs required to initiate these communities.

Further costs, such as 311 operators or new libraries, are introduced at a later time and are not included in these operating estimates.

JEREMY: Before we keep going, I just want to clarify the difference between capital and operating budgets. Capital is for stuff that gets built: infrastructure, pipes, roads, bus stops – all that stuff. And operating is for keeping everything running: transit hours, fire service, and whatnot. Here, she references the city's four-year budget cycle.

DAVIES MURPHY: In One Calgary 2019-2022, these communities will require an estimated $231 million of capital investment. Of this, the city's share of $46 million will have to be funded through either property tax or utility rates, in alignment with the type of infrastructure required. One hundred and eighty-five million dollars in developer off-site levies will fund the remaining part of the capital investment.

JEREMY: So two important things to note there. City Hall had to boost property taxes to pay for these new communities.

And the other thing that's important is what she mentioned about off-site levies paid by developers.

City admin raised a few red flags for council at this meeting, and one of the things that they flagged is that if these communities were approved, it could make it harder for the city to hit its growth targets: the targets that are supposed to shift new growth into existing neighborhoods, instead of just sprawling outward constantly.

These targets are laid out in the Municipal Development Plan and the Calgary Transportation Plan, and you'll hear Davies Murphy refer to them here as the MDP and CTP.

DAVIES MURPHY: This work includes significant benefits to the housing market and the broader economy, but it is not without risks to the city. For MDP and CTP alignment, the risk of not meeting the growth share targets in the MDP remain. Further, if growth is dispersed over more areas, slowing buildout, it will also slow timelines to achieve complete communities.

Specifically for the three added communities, all three will require complementary nearby employment or residential development in order to be fully successful.

JEREMY: Davies Murphy also raised a concern about the off-site levies paid by developers. Developers pay for infrastructure inside new communities, things like roads and whatnot. But the city has to build infrastructure to reach those communities, with streets, pipes, and other infrastructure, and so that's what the off-site levy is supposed to cover.

DAVIES MURPHY: Related to financial capacity, the key risk is that levies payable by developers may not keep pace with the rate at which the city invests in infrastructure. This is likely accentuated by the addition of more communities.

JEREMY: And this is exactly what's happened. We'll come back to that, though.

DAVIES MURPHY: Further, administration's modeling shows that the operating burden for new communities is likely to become a concern in later budget cycles, as transit, fire, and other services are introduced. This may be enhanced if growth is spread over a large number of communities.

JEREMY: But it wasn't only operating costs that are being pushed to future councils. Capital costs were also being deferred.

MAYOR NENSHI: So am I reading this correctly, that you found about $117 million reduction, but of that, at least a hundred million is not a reduction – it's just pushing the investment forward into 2023 on up?

DAVIES MURPHY: That's correct. This is deferring cost.

MAYOR NENSHI: So to be super clear, in making the decision today, council may be saving ourselves for this four-year budget cycle, but is absolutely fettering a future council to find about $100 million. Is that all capital?

DAVIES MURPHY: Your Worship, that is all capital. There is some cost share between the city and developers on that.

MAYOR NENSHI: Oh, that was my next question. Okay.

JEREMY: Now remember, city council has 11 communities before them, up from the original eight recommended by admin. Then council starts tacking on more communities.

Not all of these new neighborhoods are created equally – or, will not be created equally, I should say, as developers haven't actually started work on them yet. Some are closer to downtown than others and have better transit connectivity. The new community in Belvedere, for example, is on the city's eastern edge. It's still 10 km away from downtown, but it's one of the closer ones.

Here's area councillor, Gian-Carlo Carra.

COUNCILLOR GIAN-CARLO CARRA: This is an area of the city where we're not spreading the butter thinner over the rest of the toast. This is an area of the city where we're directly competing with the fastest-growing municipality in Canada for over a decade: Chestermere. There's huge demand to live on the central east side of the city, and our ability to sort of get there is important. So for competitive reasons, I think it's important that we add this one.

JEREMY: In many ways, these new communities are not the sprawling suburbs of the past. When you think of sprawl, you probably think of 1970s- and '80s-style sprawl, with wide looping roads and cul-de-sacs. Well, the new communities are denser and have more of a mix of uses—and housing types.

JEREMY: But they're far from the city core. Some of them are going to be pretty disconnected and almost entirely car dependent, like South Shepard in the deep southeast. This is one of the three communities that council tacked on that day, bringing the total to 14.

COUNCILLOR FARRELL: Okay, what's the merit of South Shepard? Why did it not make it onto the list? Could administration please answer that for me?

DAVIES MURPHY: Councillor Farrell, through the chair, the rationale around – so, Shepard not being recommended, related to MDP and CTP alignment, is that we see this community as being isolated and relatively small, with no additional future development in the near term or medium term anticipated at this point. And also, the existing development to the west is separated from the area by Stoney Trail, and it's likely that the area will face transit and walk and cycling connectivity issues.

MAYOR NENSHI: I'm worried that we'll never have decent transit in this neighborhood. And one could argue, well, you know, people will move into the neighborhood who don't really need transit or aren't expecting transit. But you never know, if you get in a car accident and you can't move your legs anymore, or you get old, or you have kids who become teenagers who need to get to their part-time jobs. So that, for me, is a challenge.

The other challenge here is ongoing cost. We often talk about the fire hall in Crestmont/Valley Ridge area and how that is, by far, the highest cost per call of any fire engine in the city, and we're doing exactly the same thing here: We're building the world's most expensive fire hall on a per-call basis to serve a very, very small number of people.

JEREMY: This is Councillor Shane Keating. South Shepard is in his southeast ward.

COUNCILLOR SHANE KEATING: What we've done now is we've cherry picked specific qualities that we don't like about this to use to not to approve it: isolation. I read the list, and I could go on. Skyview, Tuscany, Cranston, Mahogany, Harvest Hills, Coventry Hills are all outside of this same reason why you're saying this one's isolated. When this community is developed, as they all do over time, we'll have 30,000-plus people in the area, and it'll continue to move. All communities have to start somewhere.

JEREMY: Let's talk about what's not being talked about in all of this: climate change and greenhouse gas emissions. About a third of Calgary's greenhouse gas emissions come from transportation. The rest is from buildings. And so when we talk about reducing Calgary's climate footprint, it's decisions like these that are the ones that really matter. Sprawl drives up greenhouse gas emissions.

Accommodating growth is a big challenge for city hall – and when we’re talking about the climate impacts, we can’t just look at Calgary proper. A lot of growth to this area goes to bedroom communities like Okotoks, Chertermere and Airdrie. All of this makes for a huge carbon footprint. And someone who lives in Okotoks and drives to their job in downtown Calgary has a bigger carbon footprint than someone who lives in Seton and drives downtown.

So the thinking has been—let’s try and accommodate these people within the city limits. And hey, that way they also pay property tax to the City of Calgary.

But these new suburbs are largely car dependent. And climate change barely comes up when the big development decisions are made – if it comes up at all, either from city admin or council.

In June 2018, a month before approving the 14 new communities, city council approved a new climate plan. The city had a climate plan previously, from 2011, but came nowhere close to hitting its targets. It was supposed to cut emissions by 2020; instead emissions were going up. So city hall was having another go at it, and council approved the new climate plan unanimously.

One of the action items in this plan is to connect growth management decisions with their emissions impacts. City hall has basically treated those things as separate – and they’re not. So they were going to finally make the obvious connection.

But in July 2018, this was still an aspiration – and it was business as usual.

When these new communities were brought to council, the word "climate" didn't even appear once in the city's reports. Instead, they talked about things like Calgary being open for business, economic prosperity, and so on. And under the environmental section of these reports, city bureaucrats talked about stuff that's totally tangential and relatively inconsequential.

Let me give you a couple examples. They talked about new communities being close to the Rotary/Mattamy Greenway, the new pathway that encircles the city. Now don't get me wrong: That Greenway, it's really nice. I biked on it. But that is really not the issue at hand when we're talking about these new communities and their environmental impacts.

Here's another example: City reports talked about a higher percentage of "lane product" being in these new communities, and this "lane product" will provide “more planting space for trees, increasing the canopy within the city.” They looked at the small things and ignored the big things. They looked at the trees along the streets, but not the cars that are driving on those streets, boosting the city's emissions.

I wish I could play you city council's vigorous discussion from July 2018 all about the climate impact of these 14 new communities and how they can possibly square that with their climate plan that they just approved.

But I'm sorry to say: There's nothing to report.

We're going to listen now to what was discussed that day, to learn more about why city council approved all these communities.

COUNCILLOR WARD SUTHERLAND: One of the things that I know that's happened over the last five years I've been on council as I've gone through the tail end of the boom, per se, and gone into the recession, is that we didn't provide as a city all different areas of the city to move to. And especially in my particular ward, it was basically, there hasn't been any growth for over 30 years, or new neighbourhoods, and it's created kind of a false hyperinflation, and it's affected the demographics of who can move in and out, and the schools are becoming empty because new families can't afford to move in, etc.

So these are all considerations that we need to take a look at—providing choice, and the market will dictate what the choices and where people will move, but it's also our responsibility is to provide all different areas for people to go to and the different type of choices. And the industry itself regulates themselves through competition to ensure that that happens.

COUNCILLOR FARRELL: All right. I'm just wondering, should we throw out growth management? Should we just throw it out?

COUNCILLOR DIANE COLLEY-URQUHART: That's a rhetorical question.

COUNCILLOR FARRELL: No, it's not. It's not a rhetorical question.

So how we got here was we had over 40 communities developing all around our edges, and our debt was high as a result. The delta between when we spent the money and when we started receiving the money was significant, and you – it's not a big deal when you do it with one neighborhood, but when you have 40, and that lag time between cost and revenue can really add up, and our budgets and our debt was suffering as a result. And that was why we ended up doing growth management.

And we relied on you (admin) to tell us which ones were ready to go because of access and connections and cost and market, so you've made your best case. You've said eight, we punched it to 12, and now 13, 14, so the tolerance, of course – the more we do, the more risk there is. Will we rely on you to give us the best advice? Do you stand by your original recommendation of eight?

DALGLEISH: We do.

COUNCILLOR FARRELL: Will we be checking in from time to time on how we're doing with the economy and the absorption rate, whether it's speeding up or slowing down?

DALGLEISH: Very frequently.

COUNCILLOR FARRELL: Good. Thank you.

DALGLEISH: I think you can see, with the information you've got before you today, which we now have to work from, you can see a regular reporting and a monitoring process being built from this that council will also see regularly as well.

COUNCILLOR PETER DEMONG: When we talk about what we did for the last four or five years with growth management, it could be argued, and as Councillor Sutherland accurately put, that we pushed an awful lot of development to the satellite cities. And as Councillor Keating had pointed out, that is what, in fact, has actually happened.

We have an opportunity to take back a great deal of this market share, to encourage this economic development going forward.

The other thing I wanted to point out is we're actually moving not back to 40 or 47 communities. We're actually replacing the 27 that are actually coming out of. We've got 27 now; I believe nine to 11 in the next three years are actually going to be finishing up. This will bring us back to that 27-to-30-community range.

So if we can come up with communities that have practically zero cost to the taxpayers, allows the free market to open and run as rampantly as possible, which has unbelievable advantages, from cheap houses, cheaper – less expensive housing for the Calgarians, allows the city to take back a certain amount of market share from the satellites, I just don't see a downside.

MAYOR NENSHI: I really hear both of what Councillor Demong and Councillor Farrell are saying on this issue, and I'm very, very, very hesitant to change administration's recommendations, because it really does feel like we are watering down the ability for us to manage – I'll use that word – growth, or to develop a thoughtful growth strategy.

And the last thing I'd like to see is going back to a world where we had communities that took forever to build out, but that had costs from day one for the city. So for me this is very much a risk management issue, and I want people to remember one thing, and this is to Councillor Farrell's point. I've said this publicly, and I'll say it now on the floor of council: We're fighting a small battle after we signed the peace, having won the war.

And so what Councillor Farrell was describing is absolutely true. It's one of the reasons I'm in this chair, because our growth was causing massive debt on the city and on every single one of our kids and grandkids. We fixed that with the assistance of the development community; we fixed that with the off-site levy bylaw. The capital costs, which are the really big numbers, are sorted. And what we're talking about today is relatively small numbers.

COUNCILLOR JYOTI GONDEK: Councillor Farrell, you raise some good points, and you said: are we just throwing everything out the window? We're not. When I talk about growth strategy, I want to make sure that we're offsetting downtown as being the sole source of commercial tax revenue. So I want to make sure that as we're growing, we are allowing the periphery areas to take on a commercial base. And I would like to prevent the migration of the capital that we're visibly seeing walk out of Calgary across the street into our neighboring municipalities.

COUNCILLOR GONDEK: And as Councillor Magliocca just said, we're trying to complete mixed-use communities, and a lot of us are trying to retrofit the areas that were created with single use in mind, primarily residential. Those are planning mistakes of the past; it's a hangover, and we need to fix our dated planning principles of segregating uses. And the only way we can do that is to add on the things that we're missing in a lot of our periphery neighborhoods.

And the last point that I'll make is, there's been a lot of conversation about growing without doing it responsibly. I believe it was the council prior to this one, or maybe it was two councils ago, that figured out how to make development pay for itself through an off-site levy bylaw.

I keep hearing comments made that diminish the good work you did, so I'd like to remind you that as a council, you implemented the off-site levy bylaw, which allows development to pay for itself, and I think that's something that should be celebrated and not maligned.

JEREMY: So growth pays for growth through the off-site levy bylaw. All good, then … right?

Well, not quite.

JEREMY: Last fall, city council got an update from admin on how this is all going, and it's not good.

The housing market is down and development activity has slowed on the outskirts. And as a result, the city is not getting off-site levy money from developers as quickly as expected.

But the city is still paying for infrastructure to connect new communities to the rest of Calgary, and now city hall is bracing for a $57 million shortfall by 2022 because of it. And city admin says this shortfall will continue to grow.

We're going to listen in now to city council's Priorities and Finance Committee, the meeting of November 5, 2019 – Councillor Farrell asking questions of the city's growth manager, Kathy Davies Murphy.

COUNCILLOR FARRELL: Can we talk about the 14 new communities? If there's a slower absorption, why are we not discussing perhaps holding some back?

DAVIES MURPHY: Your Worship and Councillor Farrell, these communities all have land-use-

COUNCILLOR FARRELL: Correct.

DAVIES MURPHY: - and from that perspective, there really is nothing to hold back. Council has made the decision to grant land-use. It's now at the developer and landowner's-

COUNCILLOR FARRELL: Except we accommodated the shortfall in increased utility rates, rather than holding some back. I think that's the big question that I have.

COUNCILLOR FARRELL: When our off-site levy was supposed to cover 50%, we realized, years later, that it was actually only covering about 18%. Now it's supposed to cover 100%, and we're realizing that we're short once again. How do we trust that your numbers are right, when we have no history of getting it right?

And why – so I'll have a two-part question – why wouldn't you bring that information forward sooner so that we could adjust?

So we learned this morning that it’s not actually an agreement. We don’t sign anything with the industry. It’s kind of a gentleman’s agreement. But why is it we have to cover that extra risk? And I mean we, meaning Calgarians. Why do we not open up that negotiation and fulfil the objective, which is your directive, which is the policy.

So once again we’re not meeting the policy that council sets. We have to trust that the work that you do implements our policy, which is growth pays for growth. Why do you not bring that to us sooner so we can adjust the agreement?

JEREMY: This is Sarah Alexander, who's the city's manager of growth funding and investment.

SARAH ALEXANDER: Every time we do the levy review, we've been improving our processes, and that also includes improving how we monitor and how we see this change happening. And utilities, I would say, based on the discussion this morning, have significantly improved how they've been monitoring, and really have been understanding when there is a bit of a gap that's being seen.

COUNCILLOR FARRELL: Do you understand my frustration? We have not yet gotten to council's policy, which was at one point 50%, and now it's 100%—and we have not once met that policy. We find out about it several years later, and all of Calgarians have to pay the price for it.

So I don't know how I can move forward with any new communities when, for one thing, we know that we have a slower absorption on 14. I would like to get that right first.

So prove that your system is working, and then let's talk. But I have no trust. And I don't have trust in our ability to say no, because we haven't demonstrated that in the past.

In the next episode, we'll look at the city's long-term growth blueprint that was approved in 2009 on the understanding that business as usual isn't financially or environmentally sustainable.

"City council and the city of Calgary put in place plans to move us away from that city," said Brian Pincott, who was on council at the time. "Those plans have all been thrown out, and here we are, back where we started."

We'll also look at big changes city hall is considering to how it deals with developers, who pays for what and how the whole system gets regulated.