A letter from Ontario’s Ministry of Municipal Affairs and Housing confirms that the City of London is not required to continue setting aside millions of dollars each year to offset mandatory exemptions to Development Charges (DCs). One day before an important Budget Committee meeting at City Hall, Mayor Josh Morgan said the clarification represents a permanent reduction of about $10 million from the 2026 Budget—and even more in subsequent years. “This is the result of months and months of discussions with the Province of Ontario about municipalities’ obligations under DC legislation to backfill for exemptions,” Morgan explained. Based on a philosophy that growth pays for growth, DCs are municipal fees on new construction that are intended to offset the cost of expanding services and infrastructure required by a growing city. Development Charges contribute to expanding roads, water and sewer infrastructure, community centres, firefighting, policing, and library facilities. There are exemptions for certain developments, including affordable housing and non-profit housing. Municipalities across the province, including London, have been backfilling the exemptions with property taxes and budget surpluses believing it was an obligation under the Development Charges Act (DCA). That is no longer the case. The letter from the Ministry reads, “…the DCA does not require municipalities to fund statutory and non-statutory exemptions and discounts.” According to Morgan, the savings will total $10 million in permanent savings in the 2026 municipal budget: The mayor says the province’s interpretation of the Act will also avoid a looming shortfall in 2027. “An important piece to this is future [budget] pressure that we had not budgeted for,” added the mayor. “About $32 million of pressure within all of those [three] budgets which would have meant significant pressure of about 1.5 per cent on the property tax side, and over 5 per cent on the wastewater side.” Although property taxpayers may be off the hook for covering the exemptions, the need for service and infrastructure improvements stemming from DC-exempted developments must still be met. The mayor says money left over from exemptions in previous years will give city hall some breathing room until a longer-term funding model emerges from senior levels of government. “There will be need for support for the DC fund and DC funded projects in the future,” Morgan acknowledged. “That won’t come this year or next year, but at some point we’re going to need support. What I will say is the province of Ontario has done a really good job of actually starting to ramp up water and wastewater infrastructure spending.” Morgan said he will be including a business case in his draft budget this fall related to the DC exemption savings. The mayor has set a property tax target of below 5 per cent in 2026. The Budget Committee will receive a presentation by the mayor on June 11.
