Perverse Cities: Hidden Subsidies, Wonky Policy, and Urban Sprawl (review)

Pamela Blais’s book is a welcome and provocative addition to a relatively thin literature on urban public finance and its interaction with land-use planning in Canada. In particular, the book is focused on the implications of the way the costs of providing public and private services are translated into prices and the consequences of the choices of pricing mechanisms. As Richard Bird (1976, 1997) has often noted, the appropriate charging for municipal services is a critical challenge and opportunity for the improvement of local fiscal practice.

One of the unique features of this book is its extension of the critique of the mispricing of network local public goods to the providers and the regulators of private network services such as telephone, cable television, and postal services. Blais argues that the pricing structures of these services reinforce urban sprawl as consumers in denser urban areas subsidize consumers in less dense locations.

The book is structured in four parts. Part 1 sets out sprawl as a planning problem, and discusses the costs and benefits of urban sprawl. The emphasis is more on the costs of sprawl, including environmental, economic, and social. Blais provides a useful overview of the issues from the perspective of land-use planning. Part 2 consists of three chapters that set out the costs and benefits of planning, and the conflict between advocates of planning interventions versus advocates who couch their arguments for non-intervention in terms of public choice theory. Lastly, there is a reiteration of the classical argument by Wilbur Thompson (1968) that cities are distorted price systems and that the absence of marginal cost-based pricing has resulted in the underpricing of municipal services. The result has been sprawl reinforced by current practice in land-use planning, zoning, and servicing. Part 3 consists of four chapters: municipal services, focused on development charges and property taxes; network services, covering both public and private networks, including an analysis of the fee structure and regulatory choices that ostensibly subsidize sprawl; housing, infrastructure, and energy, including a critique of federal tax subsidies and a summary of how all of these various tax design elements work together to create the inducement/subsidy for sprawl as the rational choice of consumers of real estate and municipal services. Part 4 suggests ways by which the design of existing fiscal policy instruments could be altered to more closely reflect marginal cost pricing, while recognizing that other land-use planning policy instruments could also be used to reinforce such a transition.

The chapter on municipal costs and services is focused on property taxes and development charges, with the Ontario system being the particular system scrutinized. While Blais deems these fiscal instruments to be appropriate for municipal finance, she questions the tax architecture. In particular, she characterizes current development charge policy as “deeply flawed” and antithetical to planning objectives because it is based generally on average capital costs and often levied with minimal differentiation by unit size or location. The myriad peculiarities of the Ontario property tax system, mostly a result of political compromise and entrenched history, some of which probably create incentives for sprawl, do not escape criticism. These include the lower relative tax burdens on vacant land and the higher relative burdens on multi-residential properties that prevail in most municipalities. In Blais’s view, property tax systems that are based on market value contribute to oversupply of both land and infrastructure. While municipal and provincial policy-makers may be offended by some of these criticisms, it is clear from both the legislative framework and subsequent policy that provincial parameters governing these instruments have generally not considered increasing density and economizing on land use as part of the rationale for the particular features of these taxes. Some municipalities, however, have attempted to work within the regulatory framework to fashion policy along the lines suggested in her work. Similarly, economical land use has not been a significant driver of federal...