Publications, opinions, and speeches
Strengthen city regions with fiscal capacity
Published on 25/09/2014
Municipal governments are closest to the people as they provide essential services that impact day-to-day living. To do so they need to be flexible and responsive in the design and delivery of these services. They also need to be given the tools and means to drive change because apart from delivering services, they exert influence in a myriad of other ways as employers, wealth creators and policy-makers.
In good part, city administrations need to be more nimble out of necessity because urban life is lived in practice rather than in theory. Lack of funding for affordable housing expresses itself in leaking pipes and crumbling foundation walls. Insufficient public transit results in gridlock which has local business complaining to councillors and mayors about goods being delivered late and in poor condition. Resolving these problems is something that needs to be worked on in the present, not at some future sitting of a legislature.
Benjamin R. Barber in his book If Mayors Ruled the World asserts that cities and the elected leaders that run them offer the best new forces of good governance. I find much to agree with Professor Barber, in particular his observation that cities tend to nurture more creativity and innovation than other levels of government.
Regrettably in Canada there are strong inhibitors that prevent cities from being in the vanguard of progress and change. There is a misalignment of tasks and tools at the municipal level. Our cities are creatures of the provinces under the Constitution Act and have few residual powers. At the same time they have an array of mandates for the provision of goods and services ranging from police and fire protection to public health. There are responsibilities to create effective movement of people and goods, either by transit or roads, and to create housing for people not served by the commercial housing market.
On things like transit, affordable housing and energy systems, the costs are enormous and well beyond what the meager revenue tools of the cities can handle. Thus they have to go to either the province or the federal government for help, other levels of government which have other agendas, pressures, timetables and ideas. Cities generally must go cap in hand, tugging on their forelock as they lack the fiscal capacity to control their own destiny.
This situation might be mitigated if the city had a more robust set of revenue tools. But most Canadian cities are largely limited to the property tax and a set of other charges, many based on property, for about half their revenues. In Toronto it is about 40%, and in Montreal it is over 70%. They are not permitted to levy income tax or sales taxes, the “big daddies” of tax revenue.
In practical terms this hard fiscal reality tempers the aspirations of our cities as really transformational initiatives depend on the steady benevolence of a prime minister or premier. Sufficiently charming mayors like Calgary’s Naheed Nenshi might be able to pull this off once or twice a term if there is a friendly face in the other chair, but such synchronicity has proven hard to pull off in recent years. Public transit is a good example for that: One or two projects funded, one or two transit lines built, but an ongoing insufficiency of public transit persists in our major cities, particularly when compared with international competitor cities.
And there has been next to no progress on the other big public policy issue: affordable housing. Our major cities are faced with deteriorating existing stock and a trickle of new supply resulting in lengthening waiting lists. Households with less than $60,000 annual income face serious risks of being under housed. By example, the Toronto Community Housing Corporation with 160,000 residents and 75,000 units has a $2.6 billion deferred maintenance backlog. In 2013, there were 90,000 households on the waiting list for subsidized housing in Toronto. More than 77,000 of these households had active applications. According to a recent report released by the Ontario Non-Profit Housing Association, 47% of the 165,069 households in the province currently waiting for such housing are in Toronto. These figures for 2013 are the highest since ONPHA started collecting data in 2003.
Mayors and councilors at the municipal level know these are pressure issues, but their governments lack the fiscal capacity to deal with them. It is hard, no matter what your political persuasion, to make an argument that these funds can be generated by wringing out efficiencies.
The other issue we face in Canada is a lack of an effective city region level of government. In the Toronto region there are 29 separate governments; in the Vancouver region 21; and 16 each in Montreal and Calgary. In some cases there are two tier governments which help to manage cross border service delivery on such things as water, waste management and sewerage, and transportation. But even where there are regional governments present, there are a great many boundary-related inefficiencies that occur.
And where they exist, regional structures with broad mandates or specific to deal with transit, water or energy distribution are usually weak and lack the ability to fund their activities. This ultimately places them in the hands of provincial governments, leading several commentators to suggest that regional coordination be handed over to provincial governments for greater clarity and efficiency.
However, such a strategy will stifle innovation and ignore specific local knowledge that exists at the municipal level. Instead, major city regions should be strengthened by enhancing their revenue raising ability and broadening their powers to approach that of a province. Strengthening the governance ability of these regions with measures such as a two tier regional government, a strong mayoral system and more effective municipal political parties would reduce costs of doing public business.
As we elect new municipal governments in Ontario on October 27, it’s an opportune time to also look at ways and means to strengthen our major city regions with more powers. Whatever the legal and jurisdictional framework or differences in responsibilities, they need a powerful range of levers to introduce change. Devolution of powers, especially to generate revenue, is needed to promote fiscal accountability and change practices within the civil service for better governance.