By Alan Broadbent
Presentation to the Ontario Nonprofit Housing Association (ONPHA) Conference, Toronto, November 20, 2006

Why do we talk about cities as a matter of pressing concern?

As a Torontonian, you may have a number of questions you ask yourself:

• Why haven’t we done anything with our waterfront, like Vancouver, Halifax or Montreal?
• Why can’t we offer our chronic homeless an assisted housing option?
• Why did it take us fifteen years to get a new Opera House?
• Why does it seem like I’m waiting longer and longer for my bus or streetcar?

If you take these concerns to your councilor, they typically pass the buck, blaming Queen’s Park or Ottawa. And like most of us, you throw up your hands and just give up. But in doing so, you become disdainful about politicians and politics, wondering how it ever got so bad. But this isn’t just a story about politicians who can’t seem to get anything done. There is something basically wrong at the centre of all these questions, and the hopelessness that flows from them.

What’s wrong is really boring, wonkish, eye-glazingly abstract, and bound to make you even sadder, more confused, and maybe annoyed. Wait for it…. it’s the Constitution. The central issue is that cities don’t really have any power to control their destinies.

The historic architecture of Canada has, sometime over our 140 year post-Confederation history, become an anachronism. The idea of confederation made Canada possible. When John A. Macdonald and his contemporaries began to cobble Canada together, adding Nova Scotia and New Brunswick to the union of Upper and Lower Canada, and the other provinces in their turns, it was only through assurances of some maintenance of sovereignty that each joined up. Thus a considerable list of powers resides with the provinces, ranging from education and health care to responsibility for cities, towns and villages, making Canada one of the most de-centralized countries in the world.

Canada has changed in 140 years. Cities, and particularly the large urban regions, are no longer mere outposts at the service of the resource extractors. Wealth was once derived from the land, in the form of furs, wood, minerals, and food. In the modern economy, it is now derived from information and design, the centres of which are in the cities. It is the large urban regions that have become the locus, at scale, of diverse economies, complex human networks, and the vibrant interaction that leads to innovation and wealth creation. Financial services, finance, entertainment and media, product design, urban design and architecture, education and training all take place above critical mass in our largest cities.

In fact, city regions have become the foci of international competition. For example, since the end of World War Two, Toronto’s challenge has been to become the main economic, social and cultural city of the eastern Great lakes, a challenge it has won in surpassing Buffalo, Cleveland and Detroit, each of which had a legitimate claim to the mantle in the middle of the 20th century. This objective was never a national ambition, but a result of provincial initiative through engagement with the city.

Over the course of the 20th century, Canada experienced a two-stage urbanization. The first was the steady move of people from rural and hinterland pursuits to villages, towns, and then cities. These cities were usually the regional ones, so places like Moncton, London, and Winnipeg grew. The second stage saw people moving from these smaller cities to Montreal, Toronto and Vancouver (and after the development of the oil industry in Alberta, to Calgary). By the beginning of the 21st century, it was clear that there were three large urban regions with diverse economies which embraced a large number of surrounding municipalities. Calgary, based on its oil-wealth, was also a dynamic and prosperous city, but not an urban region or metropolis.

This growth of the largest cities came, in good part, at the expense of the next tier of cities, as then Winnipeg mayor Glen Murray pointed out in 2001. He, like many of his fellow mayors, watched successful business, media and government people moving to one of the larger cities for greater opportunities. Murray looked at the space between Toronto and Calgary, with Winnipeg, Regina and Saskatoon slowly shrinking, and called it a great national concern, something that should draw the federal government into a new concern about cities. The great writer and observer of cities, Jane Jacobs, noted the same trend, and warned that this ‘hollowing out’ of parts of the country could be problematic for national prosperity and unity.

Along with the powerful trend of urbanization, another factor added to the potency of cities: immigration. Canada, of course, has always been a country of immigrants. Our first prime minister, Sir John A. Macdonald, was an immigrant from Scotland. But beginning in the last quarter of the 20th century, two big differences occurred. First, immigrants came from many different places around the world other than Europe: South America, South Asia, Asia, Africa, and the Arab world. Most of these were people of colour. Secondly, they came from cities to cities. Unlike many previous waves of immigrants, they did not have the skills, experience or interests that would make them successful in rural Canada. Nor did rural Canada have either the concentrations of people like them to make Canada welcoming and familiar, or the programs and supports to expedite successful settlement, which were found at scale only in our big cities.

Thus we had two powerful trends, urbanization and immigration, converging to fuel the dramatic growth of Toronto in particular, but also Vancouver and Montreal. (Some other cities also experienced immigration, like Ottawa, Hamilton, and Calgary, but at a much smaller scale.) These trends had one thing in common that made them powerful and difficult to intercept: they were driven by positive attraction. People went to cities because that was where they thought they could find opportunity, wealth, education, friends, and maybe even love.

Governments weren’t oblivious to these trends, nor to the effect they were having on the rest of the country, but they were puzzled as to how they might respond. A succession of federal immigration ministers contemplated an immigration policy that would require newcomers to settle outside of the large urban regions for a period of five years, after which they could move. This met protests from immigration advocates who said that even if such a policy could survive an inevitable Charter challenge, it wouldn’t work. It would delay successful settlement, and would be hugely expensive in creating settlement programs at small scale across the country. Urban advocates simply asked the question, what is so wrong about large and larger cities? So far, such government policies haven’t taken root.

This brings us face to face with the so-called New Deal for Cities. There is a lot of confusion about what the New Deal actually is, and on particularly confusing days it seems to be not much other than more federal or provincial handouts for cities.

It might be helpful to break this down a bit. If there is a New Deal, there must have been an Old Deal. The Old Deal was firmly in the grip of the Constitution, where cities were the creatures of the provinces, and depended on provincial or, occasionally, federal governments to send money for big ticket items like transportation infrastructure. Under the Old Deal, there were good days and bad days. On the good days, the money arrived. When Prime Minster Pierre Trudeau created a ministry of municipal affairs, there was attention and money. Under the Davis government in Ontario, cities in the province generally had a friend at Queen’s Park. On the bad days, the money didn’t come, or came in small amounts with hard conditions. The prevailing moods of hostility (the Harris government in Ontario) or indifference (the Chretien government in Ottawa) made for bad days in the Old Deal.

What good and bad days shared under the Old Deal is that the decisions weren’t made in the cities. It was what the other level of government wanted that counted. The city in question lacked the decision-making power and the financial resources to do what it wanted, and often the structure of governance in the city only exacerbated the problems. For example, Toronto has known for some time that it wants to improve its waterfront, an area in rather ugly transition between its industrial past and a more appealing future. But it has neither the resources nor the powers to change it without the approval and participation of the federal and provincial governments. It has been unable to do what Vancouver has done so wonderfully to its False Creek and Coal Harbour areas.

This has led urban advocates to think about a New Deal. Waiting for handouts, constantly being the supplicant is no way to build great cities. Instead, it takes more money, more power, and governance systems that lead to effectiveness and accountability. Money, powers, and governance. Most people agree that these are the component pieces of the New Deal, but there is a lot of debate on the details.

A simple concept can help to clarify: control of destiny. What, within each of these three categories, would contribute to greater control of destiny for our large urban regions? At the end of the day, if reforms are just about being better supplicants, what Jane Jacobs has called “opportunistic beggary”, then we probably only need more charming mayors!

The powers that would yield greater control of destiny would, in the view of many, be akin to the powers of a province. Some would include power over both the education system and the public health and health care systems. They would point out, for example, that in Toronto the large immigrant population puts demands on the school system around language and cultural issues that are different than in the rest of Ontario. Local control would provide more appropriate curricula. Similarly, there are different demands of health care both in terms of pathology and care protocol.

A province would be reluctant to cede this much power to an urban region, in effect creating a province within a province. But a very interesting act has just passed in Ontario – the City of Toronto Act – which is based on the idea that where there isn’t a clear “provincial interest” the city should have the power to act. The onus is on the province to articulate the provincial interest in a persuasive way; otherwise the city can exercise control.

Money is the difficult issue. The power of the purse, as it is sometimes called, is vital. As a senior government official once said, “to tax is to govern”. But Canadian cities have limited access to taxes as revenue sources. There are various kinds of tax, some of which grow with the economy, like income and consumption (sales, liquor, tobacco, gasoline) taxes, and less growth-responsive taxes like the property tax. Canadian cities are comparatively over-reliant on the property tax: it comprises about 50% of their revenues, compared to 15% in the US and about 5% in Europe. US and European cities have access to a much broader array of tax instruments, including sales and income taxes. Provincial governments have traditionally not allowed Canadian cities the same tools. Being able to raise revenue gives a government more control over how it is spent, thus a better ability to match its ambition to its ability.

Raising revenues in our big cities in Canada is a lucrative business, as the federal and provincial governments know full well. Our big cities fill up the national coffers, so that equalization payments can be sent to poorer parts of the country. It is estimated that Toronto sends $15 billion more to Ottawa and Queen’s Park than it gets back in tax-paid goods and services. And this, as Premier McGuinty argues (backed by the analysis of the conservative Atlantic Institute for Market Studies (AIMS)) allows for much richer services to be provided to citizens in other parts of the country, subsidized by our tax dollars. Federal Finance Minister Jim Flaherty recently advised Torontonians to learn to live within their means. The fact is we live well below our means, while he and his federal colleagues live well above theirs, thanks to their ongoing plundering of the geese that lay the golden eggs: the big cities.

In our current environment, not to tax is popular and politicians are drawn to popularity like bees to honey. So when premiers and mayors object to the “fiscal gap”, what they want is more money from Ottawa. Our tax system makes Ottawa the tax collector by agreement with the provinces. Ottawa distributes part of what it has collected by agreement, and distributes other parts through program funding for things like infrastructure.

New Deal advocates have suggested a re-design of Canada’s fiscal arrangements to align better the obligations of a level of government with its ability to raise its required resources. In effect, given the current allocation of obligations, the federal government could tax less, and the provinces and cities tax more. As the TD Bank put it in a seminal report, the federal government could “do less with less”. And as the federal government lowered its taxes, the provinces and cities would move into that “tax room” that had been created. The taxpayer would probably pay the same amount.

But there is a problem with this. Canadian governments have become as tax averse as some Canadians, thanks to the anti-government, anti-tax crusades of Preston Manning’s Reform Party and its successor, the Canadian Alliance, and of their consultancies like the Fraser Institute and the National Citizen’s Coalition; all of which with our current prime minister Stephen Harper has been associated. Provincial and municipal governments don’t want to occupy tax room. They are afraid that they’ll be seen as “tax and spenders”, taking away something the federal government has gifted. So, when Mr. Harper lowered the GST by one percent, it was no surprise that no other government in Canada moved in to occupy it. This, despite the fact that the big federal surpluses that have prompted Mr. Harper’s largesse were created by a chain reaction of downloading initiated by then finance minister Paul Martin a decade ago. The provinces and ultimately the cities are now saddled with more obligations than they once had.

Exacerbating this is the fact that most Canadian cities are governed by a “weak mayor system”, where the mayor is just another member of council without significant executive authority. The mayor must cobble together coalitions on each issue. Something requiring a little leadership gusto, such as a tax raise, is just that much harder to achieve. Toronto, at the urging of the Ontario government, is moving to a “stronger” mayor system (still not as strong as some US systems like Chicago and New York, or London, England), so any creation of tax room by Mr. Harper will be an interesting challenge for Toronto’s mayor. The stronger mayor system comes into effect January 2007.

Canada needs to answer these questions of how the power of urban regions can be maximized in the national interest. While the constitutional issues are important, we must make sure that the constitution serves the country, and that we don’t contort the country to serve the constitution. And our politicians have to stop treating this question as just another turf war. This is a critical question of nation building.

And this is something we need to be concerned about because we cannot afford to dream about a great future if our destiny continues to depend on the kindness of strangers. We all have important work we want to get done in the city, on behalf of the organizations we work for, the people we live with, and our fellow citizens. We’re trying to do it now with one hand tied behind our back. And that simply makes it a lot harder than it has to be.