Canada: A Creaking System

Canada: A Creaking System
ROBERT YOUNG
As the well worn phrase has it, municipalities in Canada are “creatures of
the provinces.” Constitutionally, they fall under provincial jurisdiction which
means that the country has ten distinct provincial-municipal systems, established
by provincial law and regulated by a provincial department. The
country’s cities, towns, and rural municipalities are also constrained by
provincial legislation in areas like the environment, housing, and police.
Local governments are dependent on provincial government transfers,
which make up 15.6 percent of their current revenues. The federal
government in Ottawa makes few direct transfers to municipalities – just
1.5 percent of current revenue. Total municipal government revenue of
about $55 billion CAD makes up 4.1 percent of Gross Domestic Product.
Although they are greatly constrained, municipalities are also a responsibility
for provincial governments, which must respond to needs expressed
by municipal governments and their constituents. In provinces dominated
by cities, this is particularly the case. Winnipeg’s population, for example,
makes up 60 percent of the Manitoba total, while the three big metropolitan
areas of Toronto (41 percent), Vancouver (51 percent), and Montreal
(47 percent) loom large in Ontario, British Columbia and Quebec.
The federal government also responds to urban voters. The three metropoles
alone elect 85 of 308 Members of Parliament. Most federal programs in
Canada 19
this urbanized country are delivered in cities and towns. But it is necessary
to distinguish the federal government’s activities in municipalities from the
federal government’s relations with municipal governments. The former
are extremely diversified, but the latter have varied in intensity over the
years, last becoming strong in the mid-1970s through the short-lived
federal Ministry of State for Urban Affairs.
Now again municipal-federal relations are in flux. Continued urbanization
has created pressure for change. New foreign immigrants are attracted
mainly to the big conurbations and Aboriginal people are moving from
reserves into cities, especially in western Canada.
As the relative economic importance of cities
increases, the success of large city-regions seems
vital for national competitiveness in the global
economy. Recent major urban amalgamations and
downloading of functions to municipal governments
have focused attention on them. Most significantly,
in part because of downloading, municipal
governments have lobbied hard for financial
assistance. Municipalities argue they are too
dependent on the property tax, and that a fiscal
imbalance occurs when they are forced to constrain
spending despite the desperate need for
services and infrastructure funding.
These pressures have the federation creaking towards change. The revenue
situation has improved as the federal government steadily increased the transfers
for infrastructure begun in 1993. In 2005, as part of a “New Deal for Cities,”
it eliminated completely municipal payments of the federal sales tax, and allocated
approximately $1 billion annually from gasoline taxes to municipalities,
along with special funds for urban transit. But these tax breaks and transfer
payments never seem to be enough, and recent transfers are neither permanent
nor predictable. So municipalities are demanding a share of rapidly
growing revenue sources like income and sales taxes. Opponents believe municipalities
could do more with existing tax powers, user fees, and borrowing.
Other issues are contentious. There is disagreement about whether the
federal government should focus investment in the big cities, or spread
funding more evenly, on the view that “strategic investments” can be made
almost anywhere, and that the problems of rural decline deserve attention.
The scale of municipalities is an issue. The municipal acts of the various
provinces provide for uniformity in finances and functions, though there
are special provisions for rural areas and recently, in some cases, for more
big-city autonomy (the new City of Toronto Act and the “Contrat de ville”
with Montreal). Some cities also have gained “a seat at the table” in negotiating
tripartite deals such as Vancouver’s Urban Development Agreement.
But this concerted approach is not available to all municipalities.
Municipalities argue
they are too dependent
on the property
tax, and that a fiscal
imbalance occurs
when they are
forced to constrain
spending despite the
desperate need for
services and infrastructure
funding.
20 Robert Young
Joint decision making also has its drawbacks. The process can be cumbersome,
with high transaction costs, while blurred responsibility for decisions
raises accountability issues. Yet proponents argue that better municipal
information can improve policy, and if municipalities are needed to implement
senior governments’ initiatives, then they should rightfully partner
in policy making.
Capacity is a problem for municipalities, however. Municipal administrations
have specialized expertise in some functional areas only. Smaller
cities employ few policy analysts. Further, there is a common view that topnotch
political and administrative talent is lacking at the municipal level.
But others argue that more money and responsibility will attract talent.
The involvement of municipalities in multi-level decision making might
depend on the policy at issue. Municipal governments are strong in infrastructural
expertise for example. Similarly, city administrations worry about
concentrations of poverty and the social exclusion of immigrants and
urban Aboriginals. On the ground, municipal governments may be best
able to draw marginalized groups into new place-based initiatives.
Advocating change is problematic. Associations of municipalities have long
been active at the provincial level, though in several provinces they are
fragmented. Nationally, about 90 percent of all municipalities participate
in an effective lobby group, the Federation of Canadian Municipalities
(FCM). Much of the recent pressure on the federal government has been
led by the FCM’s Big City Mayors’ Caucus, whose members have distinctive
interests. Since municipal politics in Canada are generally non-partisan,
upward pressure cannot be exerted through party channels, but in individual
municipalities, “big tent” coalitions of interests, like the Toronto
City Summit Alliance, have had some impact on senior governments
So are municipal government problems a federal government issue?
One view is that core concerns of the big city-regions – land use and urban
sprawl, the environment and transit – transcend municipal boundaries,
inevitably rendering the provincial governments “the crucial strategic urban
managers.” As for finances, focusing on the federal government merely
lets provincial governments off the hook. On the other hand, municipal
action in areas like environmental control and policing against terrorism
have external implications that could imply some federal role. Infrastructure
needs are compelling and arguably of national importance.
The current federal government, like any probable successor, is disinclined
to interfere in fields of provincial jurisdiction, especially in Quebec
where successive governments have jealously defended provincial control
over municipal affairs. Hence, new spending will likely be directed toward
provincial governments rather than municipal ones. But there is a lot for
the federal government to do in cities. The municipalities will continue to
press, and with all those House of Commons seats at stake, the system may
well creak forward towards more complex intergovernmental arrangements.