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The Fiscal Basis for Civic Endeavour

Enid Slack Institute on Municipal Finance and Governance

University of Toronto

Conference on “Building Spaces that Work: A Canada-Brazil Dialogue Devoted to Enhancing the Public Realm”

October 20, 2005

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Outline of Presentation Background on municipal finance in

Canadian cities

Fiscal challenges facing Canadian cities

Implications for the public realm

The way forward: a role for each order of government

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Background on Municipal Finance – Expenditures Municipal expenditures, Canada,

2003: Transportation (19%) Fire and police protection (17%) Social services and social housing (15%) Water, sewers, solid waste (17%) Recreation and culture (12%) Debt charges (4%) Other (16%)

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Background on Municipal Finance – Expenditures Municipal expenditures, Canada,

1988: Transportation (22%) Fire and police protection (15%) Social services and social housing (9%) Water, sewers, solid waste (15%) Recreation and culture (12%) Debt charges (10%) Other (17%)

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Background on Municipal Finance –Revenues

Municipal revenues, Canada, 2003:

Property taxes – 53% User fees – 23% Provincial grants – 15% Federal grants – 1% Other revenues – 8%

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Background on Municipal Finance –Revenues

Municipal revenues, Canada, 1988:

Property taxes – 49% User fees – 20% Provincial grants – 22% Federal grants – 1% Other revenues – 8%

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Background on Municipal Finance -- Financing Capital Infrastructure

Property taxes User fees Intergovernmental transfers (incl.

federal gas tax revenues) Development charges Reserves Borrowing

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Background on Municipal Finance – Role of the province Provincial legislation determines

municipal responsibilities and what taxes municipalities can levy

Municipalities cannot run an operating deficit

Municipal borrowing is restricted

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Fiscal Challenges Facing Municipalities Offloading of services

International competitiveness

Urban sprawl

Amalgamation

No diversification of revenue sources

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Implications for the Public Realm – Success on Fiscal Measures

Municipalities have done well on fiscal measures:

Size of the operating deficit Amount of borrowing for capital Rate of property tax increases Reliance on provincial grants Extent of tax arrears

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Implications for the Public Realm –Infrastructure and Services

Fiscal health may been achieved at the expense of the overall health of Canadian municipalities:

The state of municipal infrastructure (water, sewers, roads, recreational facilities, etc.)

The quality of service delivery (e.g. performance measures)

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Implications for the Public Realm –Infrastructure Deficit Many studies estimate the infrastructure deficit;

measures are wide-ranging Different methodology; some cover all

municipal infrastructure while others cover only specific types of infrastructure; some separate replacement/rehabilitation from investment needs while others do not; most obtain their data from surveys.

Nevertheless, economic and social costs of not replacing infrastructure can mount very quickly and can affect the quality of life of residents

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The Way Forward - A Role for Each Level of Government Federal government:

Carry out its own responsibilities effectively Strategic investment in infrastructure

Provincial governments: Revisit local services realignment; broaden municipal

financial tools (“new fiscal deal”)

Municipal governments: Make better use of existing financial tools: user fees,

development charges, property taxes, borrowing

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Concluding Comments Fiscal health may have been achieved

at the expense of the overall health of our cities (the public realm)

To enhance the public realm, cities need to be able to match expenditures and revenues

All three orders of government have a role to play