The continuing saga of how Canadian cities fund infrastructure

by Yule Heibel on November 2, 2007

If the “continuing saga” were a question, the answer might be “badly.” Or: “poorly,” literally. The Toronto Star‘s Jim Coyle has a great column, which asks this question: If Tories not for cities now, when?

He leads us into the problem with Rabbi Hillel’s three questions, as used by Bob Rae, a Liberal politician at the federal level:

“If I am not for myself, who is for me?” An acknowledgement, Rae said, of the enduring and undeniable value of self-interest. “But if I am only for myself, what am I?” A prod, Rae suggested, to the need for generosity and justice in a world too much given to greed.

The third and final question was more succinct.

“If not now, when?”

The questions take your guard down — one hopes that many people will open their minds to the questions that Coyle’s commentary goes on to raise. The issue is how Canadian cities (municipalities) are funded: they don’t keep the Provincial sales tax, they don’t keep the income taxes, they don’t keep the GST (Goods & Services Tax, which goes to the feds). They get the property taxes — big whoop, eh? In times of economic prosperity, people earn more money (so they pay more income tax) and they buy bigger ticket items (and pay more GST and provincial sales tax). Their real estate values might go up, but their property taxes rise only marginally.

Therefore, cities don’t gain from economic prosperity at the rate they should — should, because most of the prosperity is generated by cities.

Here’s the rest of Coyle’s column. Pass it on.

In the wake of this week’s federal mini-budget, with its refusal to pony up a share of the GST to Canada’s cities, Toronto Mayor David Miller could be forgiven for joining the rabbi’s fan club, too.

If not now – when federal coffers are overflowing, when times are so good Ottawa can serve up a smorgasbord of tax cuts, when the needs of cities are apparent to any with eyes to see, when Canada’s ongoing evolution into an urban nation is made plainer with every passing census – when indeed?

Now seemed such a perfect intersection of supply and demand. Now seemed the opposite of a perfect storm providing the occasion of unavoidable disaster, but, rather, an ideal conjunction of events providing the golden opportunity for action, vision and tangible acknowledgement of new realities.

Gord Steeves, president of the Federation of Canadian Municipalities, may even have been understating things when he said Ottawa had a “once-in-a-generation opportunity” to invest in cities.

And it could hardly have been simpler. Earlier this year, Miller had launched a Once [sic] Cent Now campaign to get a penny of the GST for municipalities, which are home to 80 per cent of Canadians and generate most of the country’s wealth, but which have staggered as senior levels of government downloaded more and more 21st century responsibilities while retaining Victorian-era funding arrangements. [emphasis added]

“We need the kind of stable and predictable funding that comes with permanent access to revenues that grow with the economy,” Miller said this week. [emphasis added: this gets back to the point I made above: property taxes don’t “grow with the economy,” they stay relatively stable…]

These are hardly new words. It’s almost six years since Miller, then still a city councillor, wrote of how hamstrung cities were “because of outdated federal-provincial-municipal policies and relationships.” Cities need the sort of guaranteed funding, he said, that would allow them to rebuild. And examples are near to hand of what can be accomplished.

Whatever they thought of the verdict, almost everyone covering Conrad Black’s trial earlier this year south of the border took pains to remark on how wonderful Chicago was – it being one of the U.S. towns benefitting from billions in federal spending on urban revitalization and public transportation.

It’s striking how Rae’s ruminations on ancient wisdom seem germane to the latest news cycle.

Hillel’s third question speaks to the danger of doing nothing, he once said.

“Just as we find excuses for delay in our own lives, putting difficult decisions aside can become habit-forming in politics as well. It is easier to stick with old habits and traditional arguments long after they have ceased to apply or even make sense.”

And you don’t have to be a rabbinical scholar to know that giving cities an empty hand, and symbolic finger, when the opportunity existed to so easily do so much just doesn’t make sense.

Municipal funding is a huge problem, as far as I can tell. It colours everything, including the quality of municipal leadership we’re able to attract. I mean, who wants to go into a job where you’re hamstrung and equipped with really bad tools from the outset?

{ 3 comments… read them below or add one }

melanie November 2, 2007 at 8:50 pm

I’ve always lived in cities that rely on state (and federal) funding for infrastructure. I guess it goes with the modern tendency towards centralisation, because the state governments themselves are strapped for cash and have to go with begging bowl to the Feds every year.

On the one hand, centralisation reduces the democratic quality (as you suggest), on the other hand it enables more redistribution to less advantaged areas. There was an attempt in the early 1970s to base the federal funding model on regions rather than states (from memory there were about 15 regions, as against 7 states/territories. It made quite a lot of sense, but you can imagine how the vested interests reacted. Most governments therefore just put changes to the funding model into the too hard basket.

yulelog November 2, 2007 at 10:21 pm

I wonder if it’s a colonial legacy? I’m in Canada, you’re in Australia…?? What happened in Canada, as I’ve blogged in a couple of other posts, is that the Feds “downloaded” on to the Provinces the responsibilities (financial) for domains they (Feds) previously funded. The Provinces in turn “downloaded” to the municipalities. But since the municipalities are, in Canada, “creatures of the Provinces,” they really didn’t have the tools (methods of taxation, for eg.) to raise funds. And yes, you’re totally right that the “too hard” basket rules, because the Provinces (or states/ territories) get used to it and furthermore have created entire levels of bureaucracy to manage their budgets.

The killer is that in Canada, the Feds are sitting on billions of surplus (ok, ok, there is a debt to pay down …but still!), and the Provinces are rolling in surpluses, too. Sure, they’re supposed to “redistribute” the wealth, but the reality is that most of us here in Canada (~80%) live in cities, which in turn are underfunded. It drives me crazy when we then have politicians appealing to rural voters etc. instead of paying attention to urban voters.

What’s especially galling — as Coyle’s column points out — is that the Americans (ok, they have their own infrastructure worries in the cities) generally have far better tools at hand to raise money in urban areas, and they’re close enough geographically as well as media-wise so that we get our faces rubbed in it.

I guess the bottom line is that we could and should be doing better.

melanie November 5, 2007 at 1:30 am

I’m not sure about the colonial legacy. Maybe it’s the British though – their urban infrastructure is absolutely crumbling in parts!

Australia has no debt, a huge budget surplus and promises of more tax cuts in our current election campaign – in the face of consistent polling showing that people would prefer less tax cuts and better services. I think this is a more fundamental dispute between the obvious needs of communities for infrastructure and services and the demands of the private sector (I mean Business) to have what they want which is more money to pay the shareholders.

We are also 80% (or more) urban, but although money does get thrown at rural communities, the real spadfuls are aimed at the big end of town. Result: schools, culture, health, public transport, etc all suffer.

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