The document summarizes a presentation on Section 37 of the Planning Act, which allows municipalities to authorize increases in height and density in exchange for community benefits. Recent cases have established that requested benefits must be connected to the development. However, the presenter notes some municipalities treat Section 37 more as a revenue tool, basing contributions on estimated property value increases rather than development impacts. The presentation provides examples of municipalities requesting contributions that appear unrelated to planning issues, and argues for clarification from the OMB on the proper use of Section 37.

1. Section 37 Update: What the Cases Say
and What the Practice Is
FMC Fall Real Estate Seminar, September 27, 2012
Presented by:
Patrick Devine
patrick.devine@fmc‐law.com
and
Mark Piel
Mark.piel@fmc‐law.com
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2. What Section 37 Says:
• “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”. (emphasis added)
• No mention of “community benefits” or “public benefits”
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3. Two Views
Connection between the requested S.37 benefit and the
development (law)
Vs.
Let’s Make a Deal! (politics/economics)
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4. The Law
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5. Toronto (City) v. Minto BYG Inc.,
[2000] O.M.B.D. No. 1102 (OMB)
• a.k.a. The Beginnings of the Nexus/Connection Test
• Minto appealed its Official Plan Amendment, Zoning By‐law
Amendment and site plan applications to the OMB
• At issue was whether S.37 provisions should form a part of the
amendments and, if so, in what amount
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6. Toronto (City) v. Minto BYG Inc. (cont’d)
• City’s position: test of “good planning” as established by the
Official Plan required Minto to provide S.37 benefits in
exchange for increases in height and density
• Minto’s position: the application of S.37 benefits should not
result in further amenities other than those which have been
proposed or which are valid conditions of approval
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7. Toronto (City) v. Minto BYG Inc. (cont’d)
• Ruling: appeals were granted
• Reasons:
• Whether contributions should be authorized must be judged on the
beneficial effects of such contributions to the proposal
• It lies with the City to demonstrate the connection between the
proposal and the benefits
• Absent this demonstration, a developer is obligated to meet only the
requirements of the Official Plan policies regarding S.37 benefits
• S.37 benefits must be guided by established policy; a proponent is
entitled to some degree of certainty in ascertaining what public
benefits it will be required to provide pursuant to Section 37
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8. Toronto (City) Official Plan Residential Building
Amendment (Re), [2003] O.M.B.D. No. 926 (OMB)
• a.k.a. The Board Plays “Let’s Make a Deal!”
• City’s position: S.37 contributions do not have to be “related or justified by
the project, but need simply to be a benefit to the public offered in
exchange for the permission to develop” increased heights and densities
beyond existing policies and by‐laws
• Appellant’s position: requested contributions unrelated to the
development are not justifiable
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9. Toronto (City) Official Plan Residential
Amendment (Re) (cont’d)
• Ruling: appeal dismissed
• Reasons:
– Re Section 37 provisions: “It is the legal extension of an…age‐old
practice of securing some public benefit in return for a permission that
creates betterment or increases land value…. What is relevant is that
in return for additional development rights granted to the developer,
the exercise of which may have social costs to the public in the area,
the public receives some tangible benefit or amenity to offset the
cost.”
– S.37 benefits provided in return for permitted increases in height or
density are not required to be:
• Located on the development site; nor
• Related to the particular development
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10. Toronto (City) Official Plan Redesignate Lands
Amendment (Re), [2005] O.M.B.D. No. 1 (OMB)
• a.k.a. The Nexus/Connection Test Returns
“There must be a real and demonstrable connection between
the Section 37 benefit being requested and the positive
features of the development proposal, as stated in the Official
Plan policy.”
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11. Sterling Silver Development Corp. v.
Toronto (City), [2005] O.M.B.D. No. 1313 (OMB)
• The Board evaluates the existing decisions (Minto, 1430 Yonge,
Irber)
“The Planning Act is not a revenue statute” and “there must be a
nexus between the development and the Section 37 benefits,
demonstrating that the benefits pertain to the development
(whether on site or off), not to unrelated municipal projects
(no matter how meritorious).”
• Additional Section 37 benefits may be imposed beyond those
offered by the developer if there is a “real and demonstrable
connection” to the development proposal
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12. English Lane Residential Developments
Ltd., Re, 2011 CarswellOnt 14127 (OMB)
• a.k.a. The Nexus Test is Entrenched
• City’s issue: increases in height and density (from an approved
8 storeys to a proposed 9 storeys) would create traffic
problems in the area
• Requested benefit: contribution to a neighbourhood splash
pad (think of the children!)
• The Board found: no reasonable planning relationship
between the proposed development, the alleged impact on
the community (increases in traffic) and a contribution to a
splash pad.
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13. What the Practice Is
13

14. What the Practice Is
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15. Evidence Before OMB of City’s Practice
• ADMNS Kelvingrove Investment Corp v. City of Toronto
• Board cites the City’s Implementation Guidelines for Section
37 re: not being a vehicle to generate general revenue and
that no City‐wide formula exists since that might not survive a
court challenge on the basis that it constitutes an illegal tax
• Board particularly concerned with evidence from City planner
that the City’s “internal practice” is to have the City’s
Supervisor of Appraisal Services estimate the capital gain
[emphasis added] expected from a rezoning
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16. City’s Practice (continued)
• Then City uses the estimated “capital gain” as the basis for
negotiations
• Evidence of City planner that used 20% of the capital gain as
the “starting point”
• Board expressly cautioned that nothing in the decision should
be construed as endorsing such an approach, although no
need to decide matter as rezoning application refused
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17. City’s Practice (continued)
• What OMB criticized in the Kelvingrove is precisely how it is
done
• City planner’s role: not “land use planning”
Rather, role is to get from City Real Estate Services the amount
of the “uplift” in value from the existing zoning to the
proposed new zoning
• Then, the Councillor figures out what to spend the money on
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18. The Winners under the System
• Toronto Sun article
• The big winners:
‐ Councillor Adam Vaughan, Ward 20 ‐ $51.5 million
‐ Councillor John Filion, Ward 23 ‐ $49.4 million
‐ Councillor Kristyn Wong‐Tam, Ward 27 ‐ $48.5 million
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19. Toronto Sun Article
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20. An Example of City of Toronto Project
‐ 45 Charles Street East
• December, 2008 ‐ Approval of rezoning by‐law for a 33‐storey
building requiring $1.5 million in Section 37 benefits
• July, 2010 ‐ Committee of Adjustment approval of variance
for an additional 6 floors with Section 45(9) contribution
of $500,000.00
• 2011/2012 ‐ rezoning for an additional 8 floors,
the Councillor’s request: $5.6 million
• Final agreement: $1.6 million
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21. City of Ottawa – New Guidelines and
Protocol for Implementation of Section 37
• Adopted by Ottawa City Council on March 28, 2012
• Excerpts from staff report:
‐ “Section 37 of the Planning Act provides municipalities the authority to
share in the increased value that may result from an increased height
and/or density of a development project” (emphasis added)
‐ Further, under the heading of Background: “Section 37 of the Planning
Act provides municipalities with the authority to share in the increased
economic uplift that may result from increased height and/or density of a
development project” (emphasis added)
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22. City approves rules for sharing
wealth from rezonings
BY DAVID REEVELY, THE OTTAWA CITIZEN MARCH 28, 2012
© Copyright (c) The Ottawa Citizen
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23. Conclusion
• As I have noted in many presentations on this topic:
“. . . . it must always be remembered that Section 37 is a
section of the Planning Act [emphasis added] and not part of
some mythical “Municipal Generation of Revenue Act”
• Given the OMB cases and the City of Toronto’s current practice
and the City of Ottawa’s proposed practice, what is needed is
another OMB ruling to reiterate the rules and the true purpose
of Section 37
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24. Section 37 Update:
What the Cases Say and What the Practice Is
FMC Fall Real Estate Seminar, September 27, 2012

25. The preceding presentation contains examples of the kinds of
issues companies dealing with real estate could face.
If you are faced with one of these issues, please retain
professional assistance as each situation is unique.