White Paper
Compensation Options for Wetlands and Other Environmental Lands

Overview
Background
A. Compensation for Wetlands and Other Environmental Lands
B. Land Acquisition as a Conservation Measure
C. Methods of Compensation
Appendix 1
Appendix 2
How to Provide Input

Overview

Ottawa’s Official Plan prohibits development within significant wetlands and many natural features, and restricts development in others. Some Ottawa residents believe the owners of these lands should either be compensated for the loss of development opportunity or be allowed to develop the property. Others believe that some land should not be open to development because of its natural characteristics. Some of those who support restrictions on development of natural features also see compensation as a way to support that direction. A balance is required between the rights of private property owners and the public interest in maintaining a healthy ecosystem.

The Rural Settlement Strategy is looking at how land is developed in the rural area and how development restrictions on environment land play into that discussion, since much of the rural area is wetlands and woodlands. Furthermore, the City must adopt land use policies consistent with the Provincial Policy Statement (PPS), which prohibits development within significant wetlands and restricts it in other natural features. The discussion paper on the natural environment reviews issues related to the designation of protected areas and wetlands. However, this paper discusses whether compensation should be paid, and how it would be provided, to private land owners whose property is preserved as a wetland or other environmental feature.

This discussion paper will review three key issues:

Readers should note that the White Paper “Ottawa’s Natural Environment” also deals with a series of issues related to this paper.

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Background

Wetland issues in the former Goulbourn Township have renewed the public debate over wetland identification and compensation. In July 2006, Council asked staff to undertake several initiatives to address landowners’ concerns, including drainage improvements, education programs, and various other measures. The City also asked the Province to incorporate social impact factors in the evaluation of wetlands and to partner with it to develop compensation programs for landowners. Wetlands provide essential ecological functions, such as wildlife habitat, control of surface water runoff and cleaning of air, and compensation could be linked to the adequate valuing of these ecological goods and services that benefit the community. Compensation could entail either land acquisition by the City or other public agency or landowner retention of the land coupled with an agreement or an incentive to keep the land in its natural state.

Through its Official Plan, Council designates four different types of environmental land and sets unique development and acquisition policies for each. ¹ The four are:

• Natural Environment Area
• Provincially significant wetland
• Rural Natural Feature
• Urban Natural Feature

It is the City’s policy to buy lands in Natural Environment Areas at the owner’s request, on a willing seller/willing buyer basis. The price is determined through a negotiated agreement supported by a market value appraisal or if necessary, the owner can ask the City to acquire the property pursuant to the Expropriations Act. Where a landowner wishes to develop lands in a Natural Environment Area designation and is refused by the City, the owner may appeal the decision to the Ontario Municipal Board.

The City does not usually buy significant wetlands, although it has in the past and will do so today when wetlands are included within a larger parcel. Compared with other designations, significant wetlands are the most subject to change. There very likely are significant wetlands in Ottawa that have not yet been evaluated by the Ministry of Natural Resources or evaluated in recent years. Such “new wetlands” can be identified years after the current owner has purchased the land. Also, the boundaries of wetlands are changing continually through natural processes. Identification of new wetlands or changes in wetland boundaries can change the status of other, nearby wetlands, such that they too become significant as part of a wetland complex that meets the evaluation criteria. Some owners who find that a wetland has increased in size on their property or has expanded from an adjacent property believe the wetland is not a true wetland but rather, has been created by poorly maintained drains over the last 20 to 30 years. However, the provincial evaluation system does not consider the cause of a wetland.

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A. Compensation for Wetlands and Other Environmental Lands

The City’s current land use and acquisition policies have developed incrementally over the years since the first plan of the Regional Municipality of Ottawa-Carleton in 1974. That plan identified Conservation and Recreation areas throughout the region and said more detailed plans would follow that would be appropriate for each area’s environmental characteristics. Through the subsequent planning process that included hearings at the Ontario Municipal Board (OMB), the council of the former Region of Ottawa-Carleton determined that it would buy certain of the environmental lands rather than permit any level of development. That approach led to today’s policies for Natural Environment Areas, where development is not permitted and the City will acquire the land.

Much of the land designated as significant wetland today was designated as “environmental constraints” in the 1974 Plan, including portions of Natural Environment Areas that also carried an environmental constraint designation. Severances and subdivisions were not permitted in these areas unless all buildings and septic systems could be located outside the constraint lands.

The 1992 Wetlands Policy Statement, Wetlands: A Statement of Ontario Government Policy, triggered the addition of a wetlands designation and policies to official plans. After a lengthy process that covered a range of issues that remain active today: compensation, evaluation methods, drainage, and accuracy of mapping, the Council of the former Region of Ottawa-Carleton adopted wetland policies in 1996 that are generally the same as those found in the 2003 Official Plan. These policies do not permit site alteration or development in significant wetlands, which is consistent with provincial policy (expressed in the 2005 Provincial Policy Statement).

Federal and provincial courts have confirmed that compensation does not follow changes in zoning or other planning policy that either decrease or increase development potential on land in Canada and Ontario. Exceptions to this general rule include situations where a municipality’s zoning or planning policy is based on bad faith or is used to create publicly accessible areas.

This issue has also been raised before the OMB, which has applied the general legal principles identified above. As such, the OMB often takes on the role of determining whether the facts of the matter before the Board qualify as an exception to the general rule of law. Some of the factors that have been considered by the OMB when making these determinations include: whether the landowner is a public or private entity; any future intentions for public use or ownership of the environmental lands; the character of the lands in question; whether the designation prohibits the landowner’s intended land uses or sterilizes existing property rights; and, the municipality’s current and past acquisition policies related to environmental lands.

In this context, the OMB has been consistent in refusing to approve zoning or planning policies that are developed in bad faith, or are used to create public areas without actually purchasing the lands. However, beyond recognizing exceptions to the general rule, the OMB has applied the general rule of law that payment of compensation is not required.

A review of Official Plans for municipalities adjacent to Ottawa and in southern Ontario found no policies that require the municipalities to acquire significant wetlands or compensate owners. The issue of compensation for wetlands may be less pressing in many of these other municipalities because they are facing less development pressure than Ottawa and they may be more restrictive regarding country lot subdivisions in the rural area or prohibit it altogether.

1. Maintain the Status Quo
   This would involve having no policy to acquire significant wetlands or otherwise compensate for wetland designations . The City would continue with the current acquisition policy for other environmental features. This position would be consistent with the legal framework on compensation and with the provincial policy that prohibits development in significant wetlands and permits development in other environmental features provided there is no negative effect on the feature or its functions. Under provincial policy, environmental features may have development potential but in Ottawa, public acquisition is generally favoured over development of Natural Environment Areas, to ensure the long-term protection of the feature and its functions. When the City buys these environmental lands, it permits public access and may prepare management plans that balance the environmental function of the land with public use. Where lands are privately-owned, no public access is permitted unless the owner consents.
   
   
2. Adopt a Policy Favouring Compensation
   Council could adopt a policy to compensate for wetland designations, through acquisition or other means described in the sections below. For example, the current policy for Natural Environment Areas could be extended to significant wetlands and they could be acquired on a willing seller/willing buyer basis. As part of this decision, consideration could be given to compensating only “new wetlands” or to also including areas identified in the past. Consideration could also be given to compensating owners of significant woodlands and other natural features, where studies showed that development would have a negative impact on the feature and should not proceed.

Question for Discussion

1. Should the City adopt a policy favouring the compensation of landowners for property designated as wetlands? For other natural environment lands?
2. Should compensation apply to all designated property, or only in instances where new wetlands are designated?

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B. Land Acquisition as a Conservation Measure

The City’s current policy does not favour public ownership of environmental land in the rural area over private ownership and stewardship of the resource, and the City does not actively pursue public ownership. Further, not every owner of Natural Environment Areas wishes to sell. Many chose their properties for the natural values that the City is trying to protect. As such, the current policy has been based on a willing seller / willing buyer approach.

The City has a policy that commits Council to buying land designated as Natural Environment Areas or Urban Natural Features in the Official Plan if the owner requests that the City acquire the land. Since amalgamation in 2001, the City has completed 16 purchases of land in Natural Environment Area in the Carp Hills, Marlborough Forest, South March Highlands and Torbolton Forest. The current policy also allows acquisition of land in other areas, including those designated as significant wetland, but does not commit to acquire. From 2001 to the end of 2006, the City spent $1.84 million to acquire 754 ha of rural environmental land. Combined with properties owned by previous municipal governments, the City owns about one-third of the Natural Environment Area and significant wetland in the rural area, outside the Greenbelt and the urban area. Most of this land (85%) is within the Marlborough Forest.

In May 2007, Council approved a strategy to buy Urban Natural Features. Under the strategy, Council will acquire 15 priority urban woodlands, with a budget of $4.7 million in 2007 and consideration of $3.8 million annually between 2008 and 2016 as part of future budget processes and the long-range financial plan. Although Council has a willing seller/willing buyer policy for Urban Natural Features, most of these woodlands are not designated in the Official Plan until an agreement has been reached with the owner regarding acquisition. From 2001 to the end of 2006, the City spent $10.8 million to acquire 24 ha of Urban Natural Features.

Acquire Wetlands and Other Environmental Lands to Serve New Public Objectives

One could also consider the acquisition of significant wetlands or other environmental lands on a case-by-case basis at the discretion of Council, to serve new public objectives rather than as a means to compensate property owners. This policy could be used to focus and initiate City acquisitions. Possible objectives for an acquisition program for environmental lands include:

1. Where consolidation of land under public ownership is desirable (e.g., where these are imbedded in Natural Environment Area designations or adjacent to other publicly owned land, or where increased public access to a natural area is desired);
2. Where there are unusual or considerable development pressures on the environmental land or circumstances unique to the site suggest that acquisition is the primary means to protect the land. Such lands could include environmental land with approved development, or land located adjacent to the urban boundary or within or adjacent to Villages;
3. Where the lands serve an unusual or significant environmental function and acquisition is identified as the most appropriate means to protect them.

Create Opportunities for Land Acquisition when Land is Re-Designated

Where new environmental lands are designated in the Plan, a one-year window could be provided to allow the City to acquire the land on a willing seller/willing buyer basis. Similar to the option above, Council’s policy would be to acquire significant wetlands or other environmental lands at the time they are designated in the Plan. Many landowners object strongly to an environmental designation on their land and such a policy could help gain support for changes. When portions of the Marlborough Forest were identified as significant wetland rather than as Natural Environment Area in the 1990s, wetland owners were advised they could choose to sell to the former Region of Ottawa-Carleton within the year and that afterwards, the policy would lapse. The offer did not attract many requests to the former Region for acquisition and such a policy may result in little uptake today, although it may garner some landowner support for environmental policies. The issue of how the land would be valued would need to be resolved.

The one-year window could be combined with a concerted effort with rural landowners, the conservation authorities, and the Ministry of Natural Resources to evaluate all potentially significant wetlands within the City. Natural processes will continue to create and move wetlands over time, but a one-time effort to evaluate all wetlands will help reduce the likelihood that rural owners in the future are caught unaware of the environmental value of their lands.

Questions for Discussion

1. Should the City allocate more resources to acquire lands in natural heritage areas?
2. Should the City set new objectives for acquiring lands in natural heritage areas?
3. Should acquisitions be opportunistic, or should an explicit policy give landowners the opportunity to sell wetlands when designated?

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C. Methods of Compensation

A key challenge of any compensation program is determining the appropriate amount and the means of providing it. It is not possible to broadly predict the impact of a wetland designation on property values. The impact of a wetland designation is unique to each individual parcel of land. It depends on whether the potential remains to create an additional lot or several lots on the property but outside the wetland, and that in turn depends on such matters as the size of the parcel, its road frontage, access to the road frontage, and the size and location of the wetland within the parcel.

A parcel size of 10.8 ha or more may be used as a rough guide to development potential of rural properties and thus the potential value of rural residential properties. Subject to many other policies in the Official Plan, the Plan potentially allows a severance in the General Rural Area on parcels with a minimum area of 10.8 ha—0.8 ha for the severed lot and 10 ha for the retained parcel. Further, most residential subdivisions in the rural area are 10.8 ha or more, in part because of the higher cost involved in developing a rural subdivision. ² Thus, rural parcels of 10.8 ha or more have potential for a residential severance or subdivision, while rural parcels of less than 10.8 ha generally have potential for a single-detached dwelling. Consider the two situations below:

• A wetland designation on a parcel of less than 10.8 ha in the General Rural Area or within a Rural Natural Feature will generally not affect the development potential, and thus the value of the property. The development potential is a single-detached dwelling regardless of whether the designation is General Rural Area, Rural Natural Feature, or significant wetland.
  
  
• A wetland designation on a rural parcel of 10.8 ha or more in the General Rural Area or Rural Natural Feature might potentially affect the development potential of the property and its value. Depending on such attributes as parcel size, location of the wetland, and road access, the wetland may or may not preclude creation of one or more new lots. No new lots can be created within the wetland, so the whole of any new lot would need to be located outside the wetland and with road access. Where the overall yield of lots from the parcel is reduced, the value of the property decreases although the loss may be mitigated by any value attached to proximity to a protected area.

The impact of a wetland on the value of larger parcels with subdivision potential can also be framed in the larger context of rural property values. The value of any such property is a function of many factors, including the supply and demand for rural residential lots. Many areas are well-supplied with vacant, registered lots³ and thus, while a wetland designation may reduce the development potential and value of a property, the property’s total value is only as strong as the market demand for lots generally.

Three variations on how to implement a compensation policy are described below.

1. Offer Compensation based on Lost Value
   
   An argument has been put forward that compensation other than acquisition could be provided to owners of wetlands to reflect the value of lost development potential, with title remaining with the owner but restrictions attached to the property regarding future use. This option could potentially reduce budget pressures on the City, compared with an option favouring acquisition. Assessment of the loss of development potential and property value would be difficult to determine as a basis for compensation, and the policy does not fit well with the existing legal framework.
   
   
2. Attach Covenants Restricting Development
   
   Increased municipal acquisition of environmental lands could increase the costs of managing the properties, especially where the properties are small and scattered, or where public access is compatible with the environmental objectives for the land and public use of the land must be accommodated. One alternative to increased municipal ownership of rural land would be for the City to acquire the land, attach a covenant to the property that restricts future development, and then re-sell it to a private owner. However, covenants may be applied only in certain circumstances and would entail administrative overhead. The disposition would need to be circulated to other City departments, for example, and otherwise follow Council’s policies on disposal of real property, with the proceeds returning to an acquisition fund only with Council’s permission. This approach could be considered on a case-by-case basis.
   
   
3. Work with Other Levels of Government
   
   The City could monitor initiatives by the federal government, provincial governments, and agencies to compensate agricultural producers and other landowners for the value of the ecological goods and services they provide. The principle underlying such initiatives is that society benefits from healthy ecosystems and ecosystem features such as wildlife habitat and groundwater recharge and should therefore compensate landowners who may experience the costs of maintaining these ecosystems. Such compensation may be provided through incentives, subsidies, taxation measures (such as those described below), or other measures.
   
   
4. Utilize Existing Compensation Programs
   
   The City could publicize the financial support available to owners of environmental lands through municipal, provincial, and federal programs. Although this funding is modest and may not address the concerns of many owners seeking compensation, the Federal Ecological Gifts Program and tax relief available through the Province to owners of some environmental lands provide some financial assistance. Tax relief or a rebate on taxes are available through two provincial programs, the Managed Forest Tax Incentive Program and the Conservation Land Tax Incentive Program. These programs reduce or eliminate the property tax paid on that portion of a larger parcel deemed to have environmental value. Applications are required annually and that requirement, coupled with the right of access awarded to the program administrators, may discourage uptake of the program. Among the property owners in Ottawa who have applied for the Conservation Land Tax Incentive Program in 2007, the value of the property tax relief received has ranged anywhere from $200 to $2,000 annually.

The federal government administers the “Ecological Gifts Program”, which enables the owners of real property with sensitive natural features to donate such lands or interests therein in return for income tax benefits. More information on Eco-gifts is available at http://www.on.ec.gc.ca/wildlife/ecogifts/ .

Questions for Discussion

1. How should the level of compensation be determined?
2. How should the compensation be provided?

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How to Provide Input

Send comments by phone, regular mail, e-mail or by visiting the City’s Web site before December 9, 2007.

Contact the author by phone, in writing or by e-mail:

Judy Flavin
Planning, Transit and the Environment Department
110 Laurier Avenue West
Ottawa, ON K1P 1J1
613-580-2424 ext. 27886
judy.flavin@ottawa.ca

Go to: ottawa.ca/beyondottawa2020 and register your comments using the on-line discussion tool Ottawa Talks. Register your e-mail address at the same time to receive notification of upcoming public consultation events.

Send your comments to: plan@ottawa.ca

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Appendix 1

What are the City’s Current Policies on Environmental Lands?

Through its Official Plan, Council has designated four different types of environmental land and sets unique development and acquisition policies for each.. The four are:

• Provincially Significant Wetland –The Ministry of Natural Resources identifies these lands according to a provincial evaluation guide that considers soil composition, hydrology and plant species together. Although the Ministry is the authority that determines whether a parcel is a provincially-significant wetland, the City is responsible for identifying these wetlands in its official plan. Both provincial policy and the City’s Official Plan do not permit site alteration or development, including lot creation, in these areas although a single house can be built on an existing lot. The City does not usually buy significant wetlands, although it has in the past and will do so today when wetlands are included within a larger parcel designated in the Plan as Natural Environment Area (below – Appendix 2).
  
  The 2005 Provincial Policy Statement changed the level of protection afforded to certain significant wetlands in the city. Whereas the previous policy would permit development in significant wetlands in the Carp Hills and Morris Island, provided it had no negative impact on the feature, the 2005 Provincial Policy Statement includes these wetlands in the category of significant wetlands where no development is permitted. 4
  
  
• Natural Environment Area – Initially identified through studies done for the former Region of Ottawa-Carleton in the 1970s, these areas include those with the greatest environmental value, such as the Carp Hills and the Marlborough Forest. Policies for lands shown in the Official Plan as Natural Environment Area and Rural Natural Feature (below) generally meet the Province’s requirements for the protection of significant woodlands, valleylands and wildlife habitat5. While current provincial policy would allow development in these areas provided such development does not negatively affect the natural feature or its functions, successive municipal councils in Ottawa have decided not to permit development in Natural Environment Areas, adopting policies similar to those for significant wetlands. It is the City’s policy to buy these lands at the owner’s request, on a willing seller/willing buyer basis.
  
• Rural Natural Feature –These woodlands and wetlands were identified by the former Region of Ottawa-Carleton based on fieldwork and other research in the mid-1990s, through the Natural Environment Systems Strategy. The City’s policy for these areas is similar to the provincial policy: development is permitted provided it will have no negative effect on the natural feature or its functions. An Environmental Impact Statement (EIS) is required to support the proposed development. Implementation of the policy may result in no development on some portions of individual parcels. The City’s policy is that it may choose to buy lands designated Rural Natural Feature but it is not committed to buying them at the request of the owner.
  
  
• Urban Natural Feature – The City identified these woodlands and wetlands through a citywide evaluation of the features remaining in the urban area following amalgamation in 2001. If an urban boundary expansion were to add other woodlands or wetlands to the urban area, they would be evaluated on the same basis. It is the City’s policy to acquire lands designated as Urban Natural Feature. The features are identified in the Plan once an agreement has been reached with the landowner for their acquisition. Within the urban area, environmental lands support ecological functions as well as provide recreation and outdoor opportunities for urban residents and public use would be difficult to restrict.

Appendix 2

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White Paper Endnotes for: Compensation Options for Wetlands and Other Environmental Lands

Other policies (e.g. for agriculture resource land and flood plains) also restrict the use of land but are not considered here.

² Over the last 35 years, only 30 subdivisions of less than 10 ha have been approved throughout the rural area, out of a total of 176 subdivisions in the period.

³ The Rural Residential Land Survey 2006 Update by the City of Ottawa estimates there is a 37-year supply of vacant land in villages and the General Rural Area, assuming recent rates of development continue.

⁴ The Official Plan Review will need to consider whether and how to change the Official Plan to reflect this change to the PPS. The Plan policies that now apply preclude development and are consistent with the provincial policy.

⁵ A background paper for the Official Plan Review, Ottawa’s Natural Environment System: How Well Is It Working, compares the provincial policies for environmental lands with the policies in the 2003 Official Plan.